Beyond the Bid: What Drives Auction Prices?

Have you ever wondered why two people can look at the same asset and be willing to pay completely different prices? You may even have found yourself bidding higher than you originally planned.

A bid placed at auction is shaped by more than just the value of the lot itself. The way we think, the actions of competing bidders, the first price we see, the timing, the weather, and even the closing format can all influence the decisions we make. Recognising these hidden influences can help you take part in every auction with greater confidence.

Seeing value through other’s eyes

Auctions can reveal what an asset is worth, but also what bidders think everyone else believes it's worth. Confusing? It becomes clearer with a well-known economic theory…

British economist John Maynard Keynes introduced an economic analogy in 1936 known as the Keynesian beauty contest, which explains this type of strategic decision-making. He compared financial investment decisions to a fictional beauty contest, illustrated through a newspaper competition in which participants were asked to choose the six most popular faces from a set of one hundred photographs, rather than the ones they personally found most attractive. The winner wasn't the person who picked the faces they found most attractive, but the one whose choices most closely matched the average opinion of all participants.

The same thinking often applies in auctions. A bidder may begin by deciding what an asset is worth to them, but as bidding starts, their focus can shift to different levels. Instead of asking, "Is this property or vehicle worth this price to me?"  they start asking, "What do the other bidders think it's worth?" or even, "What do the others think everyone else is willing to pay?"

This is why auction prices are influenced by more than an item's intrinsic value. As bidders react to one another, expectations and perceptions become part of the process. In competitive auctions, the behaviour of other bidders can be just as influential as the item itself, sometimes pushing the final selling price beyond what an individual originally intended to pay.

Anchored from the start

Building on the Keynesian beauty contest concept, another cognitive bias that shapes our thinking during bidding is anchoring bias. Have you ever noticed that the first number you hear tends to stay in your mind? Whether it's a reserve price, an opening bid, or even an estimate you've heard beforehand, that initial price often becomes a reference point when judging every bid that follows.

Imagine attending a vehicle auction after hearing that a particular classic car could sell for R2 million. If the bidding stops at R1.8 million, it can feel like a bargain because your expectations were already anchored to the higher price. The asset itself hasn't changed; only your perception of its value has. Every new bid placed during an auction can also become a new anchor, gradually shifting what bidders consider to be a reasonable price. As the auction progresses, these moving anchors can influence bidding behaviour and contribute to higher final selling prices.

The clock behind the bid

The best time to bid? The time of day an auction takes place can influence how many people participate, whether you're bidding online or on-site. Evening auctions, particularly those held between 6:30 pm and 10:30 pm, tend to attract the highest number of active bidders. With more participants competing for the same lot, bidding is more competitive, which can result in higher selling prices. Auctions that close during the day, between 11:00 am and 2:00 pm, generally see moderate activity, as many bidders are occupied with work or other commitments. Late-night auctions, especially those ending after 11:00 pm, typically attract fewer bidders and achieve lower final prices.

But timing isn't just about the hour on the clock. The day of the week, the weather, and even what's happening around you can play a role. Think about it: if the Springboks are playing, how many people are choosing to watch the game instead of bidding in an auction? The same applies during public holidays, long weekends, and other major sporting events, when people's attention is focused elsewhere. Warm, sunny days are often associated with better moods and higher auction results, while cold or rainy weather can lower enthusiasm.

Wednesday evenings often perform well because fewer auctions are taking place, giving bidders fewer listings to choose from. Sunday evenings generally attract high traffic, but because many auctions end simultaneously, bidder attention is spread across multiple sales.

So, when is the best time to bid? It depends on your strategy. Auctions with fewer active bidders may give you a better chance of securing an item at a lower price, while peak bidding times often bring more competition and higher final prices. Although timing is only one part of the equation, choosing when to bid can be just as important as deciding how much you're willing to pay.

It’s not over until it’s over…

If you've ever taken part in a timed online auction, you've probably watched the countdown tick towards zero. Unlike traditional on-site auctions, where the auctioneer decides when bidding ends, timed online auctions follow a predetermined closing format. Imagine you're bidding on that classic car. With just three seconds left, you place your bid, convinced you've secured the winning bid. Instead, another bidder responds, the countdown resets, and the auction continues. Why? It all comes down to the auction's closing format.

Hard-close auctions

In a timed online hard-close auction, bidding ends exactly when the countdown reaches zero. Unlike a traditional on-site auction, where the auctioneer continues accepting bids until no further offers are made, there is no extra time to respond. As a result, some bidders deliberately wait until the final seconds to place an offer, a tactic known as sniping. One study found that sniping can increase a bidder's chances of winning by around 9% compared to bidding earlier, mainly because competing bidders have little or no opportunity to react before the auction closes.

Soft-close auctions

In a timed online soft-close auction, the auction timer is extended each time a qualifying late bid is received. Each extension gives competing bidders another opportunity to respond, allowing the auction to continue until no further bids are received. By removing the advantage of last-second bidding, soft-close auctions are designed to neutralise sniping, encourage more open competition, and often lead to better prices.

The takeaway

Every bid is influenced by more than the asset itself. The Keynesian beauty contest shows how other bidders shape our decisions. Anchoring explains why the first price can influence every bid that follows. Whether you're bidding in a timed online auction with a hard-close format or attending a traditional on-site auction on a sunny Wednesday evening, bidder psychology, timing, competition, and even the weather can all influence the final outcome.

Recognising these influences won't change how an auction works, but it can change how you approach one. Bid with a budget, stick to your strategy, and understand what's driving the bids around you.

Want to explore the psychology in more detail? Read The Psychology Behind Bidding Behaviour for a deeper look at the cognitive biases that influence every auction.