Auctions usually have a lot of bidders interested in everything posted. The auction is considered more successful when the number of bidders increase. This will increase the percentage and change of actually selling something through the auction.
However, this well common theory has been challenged by a new study conducted by a team of economists from the University of Sydney and the University of Technology Sydney (UTS). They were able to find a hypothesis that shows that the increase of the number of bidders will actually lower the chances of people bidding.
The study talks about the fact that people would be intimidated to actually bid if there are a lot of bidders available for bidding. The study was led by Associate Professor Agnieszka Tymula from the University of Sydney’s School of Economics. Agnieszka commented on the results obtained and observations saying, “This is a counterintuitive finding because usually auctioneers would assume that the more bidders there are in an auction, the more money they will make – the logic being that that the more bidders there are, the more likely it is that there is a bidder with a high willingness to pay for the good. However, it turns out that there is also a downside to having more bidders – most people bid less.”
The study included the use of 100 bidders as the number of rivals increased almost 50% of the bidders did change their bids accordingly. This showed a decrease of the amount of the bids for almost 7% due to being scared.