Okay, so my last little bit about eBay (unless I think of something else) is more of an economics/finance lesson. Life is full of risk and there are ways to mitigate risk. For example, insurance is the most frequent and best understood risk-mitigation strategy. So what on eBay does the same thing?
If you have ever used the site, you have probably seen the "Buy It Now" (BIN) feature. Sometimes, it is offered with an auction (that is, you can purchase the item at a higher price and avoid the auction until someone bids) or it can be a stand-alone offer, avoiding the auction part automatically and being a normal sale. So, in a normal eBay auction, you may lose, even at the last minute as my prior posts pointed out. But in a BIN scenario, until someone bids, you can purchase the item and make sure you own it. However, it is more expensive at the time. Let me give you an example. Item A has both an auction and BIN component. The auction ends in 5 days and the starting bid price is $0.99 while the BIN price is $24.99. Now, you have a choice. Wait to see if someone bids (ending the BIN feature), see if someone does it buy it, or wait to see how long it will last untouched. Now, if you felt you would be willing to pay $20 for the item, you may not want to BIN. However, because there is a chance that either you will lose the auction or the auction price may go above the BIN price, you might be willing to pay a premium to make sure you own the item. Then again, if you bid, you could win the item for $3.
So this is where risk and risk mitigation comes in. You know you would be willing to spend $20 and for an extra 25%, you could own the item now with no hassle and no worry. But, is it worth it? That is where other information and other factors make an appearance. Odds are, the item you want actually has duplicate auctions going on. (For example, you could be wanting to buy a certain book and find there are 5 copies of the exact book being auctioned off separately.) At this point, you can find out how much the other items are currently going for (remembering always about vultures) and what other options are available. Going back to my other example, if Item A is being offered as a BIN for $19 in another auction, you have a slightly better decision to make, items themselves and other factors being equal.
Lets continue that line, Item A being offered with a BIN of $19. Now, to add some detail, this one also has an auction component, but the starting bid is $4.99 instead, and ending in 6 days. Now, you could always win the other auction for $0.99 or this one for $4.99, but they could both shoot up in price in a few days after someone puts an opening bid out there, removing the BIN, and removing the upper value limit information for a vulture. (To better explain, you and the person who will bid first know that the item is worth $19, but if the BIN price disappears, someone else, without having the option to BIN, might be willing to spend $32 on the item, and thus might actually win the auction by bidding $32 as the maximum as both you and the first bidder realize that is more than you COULD have had it for.)
So now we come to risk mitigation, having a few options, and different risks involved. Just like the real world, this example has become complicated, partly as an illustration and partly to make sure I don't actually have to use actual economic terms to describe the situation as that is beyond my education level. (That doesn't mean I don't know what I am talking about, just that I put it the idea into layman's terms without having the full academia background to explain it to an econ major.) So what are your options? Well, you can bid on either auction, you can BIN from either, or you could bid on the higher BIN and wait to see if you win or someone else buys the other copy now. Yep, a lot of choices, but some are smarter than others. In my scenario, you would be better off BIN for $19 than to try and win either auction for one primary reason. Because in eBay you enter your maximum bid for an item and let eBay bid for you, you would go to the more expensive BIN and bid $20 (having to go to that one because it is more than the other auction's BIN price). But, because this is higher than the BIN of $19, you should just buy the item right now. However, that means you will pay $19 automatically. Could you still win the item for $0.99? Yep, but it is risky. So how much is risk worth to you? If you had more info, like how much similar auctions that have already ended went for, you might decide not to BIN and bid on the cheaper auction component, going up to your $20 max. That way, you will either win the auction for less than you were willing to spend, win the auction for a little more than you could have bought it for, or lose the auction entirely. (What really makes this hard is that because of the time difference, you could end up losing this auction and still be able to buy the item from the other auction, depending on what other people have done.)
So there is your risk spelled out. What do YOU do? Me, I BIN for $19, take my hit, and end up with my item. (Actually, this is something I have just done after losing other auctions at the last minute.) Then again, I am not much a risk-taker. I have never been a haggler. In accounting terms, I like fixed costs rather than variable. In
Star Wars terms, I am a Sith as I deal in absolutes, as Obi-Wan says in
Episode III: Revenge of the Sith.So how about you? Do you buy the item or bid for the item? Do you eliminate risk and pay the premium for it or do you take your chances and hope to save some money? What kind of person are you?