Sunday, October 2, 2011

Jumping on Penny Auctions

Is jumping on penny auctions ethical? Is jumping on penny auctions a good strategy?
These are two very different questions that need to be answered by every penny auction bidder.

What is jumping on penny auctions?
Jumping is a term used to describe the phenomenon where bidders enter an auction after someone else has placed a considerable number of bids.

Why Jumping?
The reasoning from the jumper's point of view is simple - he is trying to look for "overpriced" items. He figures that since this product usually sells for say $5, and currently it is at $5.20, it is likely to end soon. However, what he failed to realize is that there is probably someone who has invested heavily in the auction.

The effects of jumping become much more evident when you are trying to bid on higher end items like iPads that can go on for hours together and have tens of thousands of bids in all.

Is Jumping Ethical? 
Any question relating to whether something is ethical a tough question to answer. You certainly know that it can happen. It affects power bidders disproportionately. Before you place a single bid on a penny auction, you should know that jumping is certainly a possibility that might occur. Instead of looking at it from the perspective of right and wrong, I would like to look at it from the point of its utility, i.e. is the jumper in a better position to win a penny auction.

I know a lot of penny auction bidders are very touchy about this topic and have strong feelings on this subject. I would like to resist this temptation and look at whether it is a good strategy or not. After all, my blog is about telling you when something would work and when it wouldn't. 

Penny Auction Strategy - Jumping? 
So is jumping a penny auction strategy?
Here are some points to consider:

Let us try to look at this from the point of view of the jumper. The jumper usually expects that the auction will end soon enough or sooner than its average. This is because it is closer to the "average price" of the item and it seems already overpriced.

However, anyone who has bid on penny auctions knows that prices of items can vary tremendously. It is not uncommon to see a product sell for $5 now and $50 an hour from now. It is therefore very hard to know if a given auction will be closer to its "average". Therefore, the jumper might end up in an overheated battle.

From the psychology of a power bidder, if he sees a jumper, chances are he will continue to bid. The process might go on for a long time. In addition, if there are bidders who dislike jumpers, they might make every effort to put in that extra bid just to make sure that you don't win. This is a real possibility that you should be aware of.

Apart from this, if you jump at penny auctions, chances are that the other people, especially the power bidder for that particular auction will remember you. You might then expect a lot more jumpers on auctions that you are participating in. If you want to have a long term stay in a penny auction, hostility towards a bunch of power bidders will not exactly work in your favor.

Know the risks before you think of jumping as a penny auction strategy. Remember it is certainly allowed, so you can jump if you want to - that' the bottom line.


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