The ebay Effect

One of the quirks of human behaviour is that we value things more highly if we own them. When selling your house, you remember the good times, but prospective buyers notice the cracks in the walls. One of the places where this effect can give you trouble is on ebay.

Suppose that you are searching for an item on ebay and are pleased to find it. You then make a bid. But the bidding won’t close for another three days. Two days later you see that there aren’t any higher bids. At this point, you begin to mentally treat the item as partially in your possession.

The rest of this story is familiar to frequent users of ebay. In the last minutes of the auction, a higher bid will come in and anger you. This newcomer has a lot of nerve! After all, this item has been nearly yours for three days. Now you’re tempted to enter bids higher than the upper limit you decided upon three days earlier.

I don’t have any grand ideas for how to combat this tendency. Maybe just being aware of it can help us save some money in this type of situation.

Comments

  1. UnknownSeptember 2, 2008 at 9:45 AM

    Hi,
    One way of combating this is to not bid on items that are closing so far away. For items that are closing in more than 24 hours, I usually just add them to my 'Watch Item' list as opposed to bid on them.

    If the price is still attractive closer to the end of the auction, only then will I bid...

    ReplyDelete
  2. Michael JamesSeptember 2, 2008 at 10:06 AM

    Fernando,

    This sounds like an effective way to avoid the trap of starting to feel like the item is yours. Of course, you become the guy who is taking the item away from someone else who feels like the owner for a few days. I guess every ebay newbie has to go through the pain of losing an item at the last minute.

    ReplyDelete
  3. AnonymousSeptember 3, 2008 at 4:16 PM

    I recommend only bidding in the last few minutes of the auction. Yes, I'm the person that will "steal" somebody else's auction. ;-)

    This is best done with "auction sniping" software, which can even group similar items together and bid at the last minute on each until you win the item.

    The advantage of this method is that you'll never be tempted to bid over the maximum amount you had decided.

    ReplyDelete

Post a Comment

Popular posts from this blog

Short Takes: InvestorLine’s HISAs, 24-Hour Trading, and more

I recently moved some cash into BMO InvestorLine’s high-interest savings accounts (HISAs) that are structured as mutual funds.  Their designations are BMT104, BMT109, and BMT114, and they purportedly pay 4.35% annual interest (which they can change whenever they like).  However, the way they report the monthly interest payments is so baffling that I wasn’t able to sort it out in my first 15 minutes of trying.  A further complication is the following text in the HISA description: “The Bank may pay, monthly or quarterly, compensation to your Dealer at an annual rate of up to 0.25% of the daily closing balance in the BMO HISA.”  I couldn’t find any evidence of such a charge, but I haven’t been invested for a full quarter, and I can’t yet say that such a charge isn’t buried somehow in the confusing reporting.  I have more digging to do before I can recommend these HISAs. Here are some short takes and some weekend reading: Preet Banerjee explains the dangers of Robi...
Read more

My Asset Allocation

I’ve resisted discussing my asset allocation for some time, but now is finally the time to describe it and the reasons behind it. I’m not holding it out as a model portfolio; I believe it’s suitable for me and not necessarily anyone else. With that warning, enjoy the discussion and feel free to ask questions or take some pot-shots. The main reason why I haven’t discussed my asset allocation in detail before now is that I don’t want readers to treat it like a model portfolio and follow it blindly. Everyone’s situation is different. The need for variation in asset allocation from one investor to the next usually isn’t huge, but there is no one-size-fits-all portfolio. A secondary reason for keeping my asset allocation to myself is that I can’t be sure I’ll never change it. For example, I recently made the minor change of switching from an ETF of small-cap stocks to an ETF of small-cap value stocks . I don’t have any plans to change my current allocation, but I may think differe...
Read more

What to Do About Crazy Stock Valuations

Image
The last time I had to put a lot of effort into thinking about my finances was back when I retired in mid-2017.  I had ideas of how to manage my money after retirement, but it wasn’t until a couple of years had gone by that I felt confident that my long-term plans would work for me.  I had my portfolio on autopilot, and my investing spreadsheet would email me if I needed to take some action. I was fortunate that I happened to retire into a huge bull market.  I got the upside of sequence-of-returns risk.  The downside risk is that stocks will plummet during your early retirement years, and your regular spending will dig deep into your portfolio.  Happily for me, I got the opposite result.  My family’s spending barely made a dent in the relentless rise of the stock market. However, stock prices have become crazy, particularly in the U.S.  One measure of stock priciness is Robert Shiller’s Cyclically Adjusted Price-Earnings (CAPE) ratio .  In the U.S...
Read more

Archive

Show more