Northwestern University Newsfeed

August 28, 2006

GALINSKY: Setting a low price in an auction, although it seems to defy logic…why would you ever set a low price for something? It actually leads you to get a higher final price when there is a substantial market for the item that you are selling.

Galinsky says setting a low starting price allows for more people to enter the bidding, but inevitably inflates the final price…

GALINSKY: What psychologists have known for years is that when someone invests time and energy in something, they then feel compelled to spend more time and energy on it. And so, what low starting prices do is they kind of trap people. By letting them start really low…then they start bidding more and really want to win this thing.

Galinsky says buyers, when presented with two identical items, often bid on the item with a higher number of bids…

GALINSKY: One of them has 20 bids and the other has two bids. What you think psychologically is, “Wow! That one with 20 bids must be really valuable! People really want it!” You don't realize is that the number of bids are actually being caused by the low starting price…and that's what drives up final prices.

Galinsky also offers tips for buyers to get a good bargain on eBay….

GALINSKY: The best way to find a good outcome on eBay is to look for misspelled items because if something misspelled, fewer people can find it and you get a better outcome. Another way that you might look are things in which a photo is irrelevant, but some people only buy if there is a photo available.