Auctioneer And Bidder Strategy In Nigeria – Auction market is a type of market which involves a group of people known as bidders and an Auctioneer. In most cases, the Auctioneers will declare the asset for bidding and the bidders will start stating their prices.
In most cases, the seller will go with the highest bid. However, there are other types of auction in which the seller goes home with other price apart from the highest bid.
In the auction market, the bidder wants to go home with the asset for the most affordable price while the seller wants to go home with the highest bid. Hence, they usually employ different strategies to achieve their goals through the auctioneer.
These strategies have been developed using different theories over time. However, some of the strategies have also proven to affect either the bidder or the Auctioneer in one way or the other. This has also affect the market share of the auction market in general.
This article therefore seeks to analyse the different strategies used by both the bidders and the seller in any auction.
Auctioneering Strategy In Nigeria
The Auctioneer is the seller of the asset in an auction and they are known to come up with different strategies to make people buy their assets at the highest price. What are these strategies? And how do they even use them?
- Rafter Bidding
This is a strategy used mostly by high end Auctioneers in which they create false bidding in order to create a greater demand for the assets to be sold. This can also lead to an extension of the bidding momentum. This strategy is however frowned upon in most countries including Nigeria.
- Collusion Involving The Auctioneer
Here, the Auctioneer intentionally participates in the bidding process thereby increasing the competition. However, before the final bidding, the Auctioneer will pull out. For example, a dummy bidder can act in conjunction with the Auctioneer to convince genuine bidders into paying more.
- Suggested Opening Bid
This is another great strategy used by Auctioneer. Here, the Auctioneer will announce an opening bid with the hope that the first bidder will announce a price a bit higher than the suggested price. Once the first bid is made, there will always be more other higher bids. Normally, the Auctioneer is hoping to get at least a 50% increase in the suggested opening bid.
Bidder Strategy In Nigeria
In order to go home with the asset for the most affordable price, the bidders also use different strategies. Some of these strategies include
- Bid Shading: This is a strategy used in which the bidder will announce a lower price than his or her actual value perception of the asset. This can result into a serious consequence but if the bidder wins, he is most likely to go home with the asset for the lowest price. This strategy is also very good in preventing the winner’s curse. The winner’s curse is a situation whereby some bidders known as auction cancellation hunters bid minimum amount of money on an auction with the goal of getting it canceled.
- Auction Sniping: This is another strategy adopted by bidders in Nigeria in which they place their own bid at the last moment of an auction. This is to ensure that they get the auction at a very low price.
- Jump Bidding: This is another strategy in which an aggressive tactic of increasing every bid by high amount is adopted. This comes with a high level of consequences.
- Bid Rigging: This is a strategy in which bidders in an auction will gang up together to form a ring with the goal of manipulating the result. They will join hand together to bid against any outsider thereby reducing the competition and the final price. In fact, another informal auction can take place within the members of the circus.
Conclusion
In order for an auction to be effective, bidders and seller must be present as they form the key components of the market. However, the goal of each of them differs and this gives room for different strategies to be employed.
These strategies have been proven to work in the Nigerian market and they have been adopted by many other Auctioneers in the World. However, each of these strategies come with its advantages and disadvantages. If you want to know more about auctioning and the different strategies used by bidders and Auctioneers , contact Lansar Aghaji & Co for more information today.
Auctioneer And Bidder Strategy In Nigeria