I’ve been using eBay for a while, but only recently came across a multiple item auction where the seller had a few dozen of the same item she was selling. I’m baffled about how these work, though. Can you explain how these multiple-item Dutch auctions work on eBay?
If you think that a regular auction with a reserve price is confusing, let’s move into the most complicated part of eBay auctions: multiple item auctions. It’s inherently confusing, but let’s try to step through it to understand what occurs.
Let’s assume that you were digging through your parents garage and found a box with 10 copies of Bob Dylan’s first album in mint condition. Nice! You could list these as ten different auctions, or you could sell them one at a time across ten auctions, but you’d rather just get it over with so you choose to do a multiple item auction with quantity = 10.
Your opening bid requirement is $5 and sure enough, it doesn’t take long for collectors to find your auction and bid $6 each, ten bidders. eBay will show each is in a potentially winning position and their winning bid is $5 (not $6 because no-one is competing against anyone else yet). If the auction closed immediately, they’d all be winners.
Hold on, though. One nuance of a multiple item auction is that you can’t enter a maximum bid: what you bid *is* your bid, though all auction winners pay the lowest winning bid across all items, so in effect you can still end up paying less than your bid, depending on how the auction ends.
Back to Dylan. A record collector learns of the auction, we’ll call him bidder #11, and bids $20 for 5 albums. Now is where things get complicated: five of the albums are taken by this new bidder, but what happens to the other five disks?
The answer is that the older bids trump the newer bids, so bidders #1-5 would be in the lead for the other five disks and bidders #6-10 would need to up their bid to stay in the running.
Confusing? Yeah. Worse, the new bidder might not pay $20 each for the five LPs, depending in the final winning bids. They might only end up paying $5 each, an amount lower than the earlier bidders!
Now bidder #6 comes back and bids $100 on one of these CDs. He really, really wants it. The lowest winning bid would still be $5, but bidder #6 now supplants bidder #5 (remember, it’s newest to oldest).
If the auction now closes without any changes — and this is when it really gets weird — everyone pays the cost of the lowest successful bid. This means that bidder #11 who offered $20 per disk and bidder #6 who offered $100 pay the same amount as bidder #1-4, namely $5 each.
This is an instance of when you can lose an eBay auction and see it close at less than your maximum bid! Kind of the luck of the draw.
Honestly, multiple item listings make my head swim and I had to fact check this blog entry with a couple of eBay gurus to make sure I had this all correct myself!
Fortunately, you can pretty much ignore these nuances and just bid the max you’d pay on a multi-item auction, including indicating how many you’d actually buy. And that’s all there is to it. The rest you can just ignore as magic.