Often you can get great bargains at auctions. One of the benefits of auctions is that the seller knows the items are going to the highest bidder. So, why aren’t auctions used more? N.C. State University economist Mike Walden responds.
“Well, we do go to a lot of auctions, and it’s just fun. If you don’t buy something, you see people competing. And the benefit of an auction is that, presumably, the item is going to go to the person who values it most. And how do we know how people value it?
“It’s what they’re willing to pay for it. Then of course, your other question is right on the mark too. Why don’t we see auctions used more?
“Well, I think it has to do with the fact that they do take time. Let me give you an example. Let’s say that we were going to auction off gasoline at the gas station rather than as you do now. You go ahead and look at the price. You pump how many gallons you want. What if every 10 minutes, people would gather around and the operator of the gas station would say, ‘Alright, we’re going to auction off the number of gallons I have here.’
“Obviously, that would be very, very time consuming. Yes, the gas station maybe could make more money off of each gallon. But they’re probably going to lose a lot of people because people are going to say, I don’t want to do this. I don’t have time to do this.
“So I think that’s the big problem with auctions, that they can be very, very time consuming, because it takes time for those bids to be revealed. Nevertheless, you and I certainly are going to still go to a lot of auctions.”