Thread by @PopCultureMath

Underbidding in Contestant’s Row: A Thread (5)

Who would think the highest bid in Contestant’s Row would prevail over 50% of the time? Certainly not me when I started my research.

Please pick up the book in about one year’s time to learn more. 🧵👇

1, The last bidder (Bidder 4) won Contestant’s Row bidding 41% of the time. He would have won 53% of the time had he always bid $1 above the highest prior bid.

2. Bidder 4 won with a $1 bid only 26% of the time. Had he instead bid $1 over the highest prior bid every time he bid $1, he would have won 44% of the time. That’s how egregious underbidding was.

3. What causes underbidding in Contestant’s Row: A multitude of factors, including
A)A Fear of Going Over
B)Being Accustomed to Sales Prices
C)High End Brands and Features
D)Unfamiliar Items Up for Bids
And there are others…

4. Different factors affected underbidding differently depending on the situation. Contestants bid on Vacations in Contestant’s Row with sales prices in mind, while electronics often were high end brands or offering high end features that contestant neglected to consider.

5. Anchoring: As mentioned, Bidder 1’s bid anchored the bids of subsequent bidders. Anchoring has been thoroughly studied by psychologists. In the absence of other numbers, we humans gravitate towards whatever number is out there, whether we have reason to or not.

6. In Contestant’s Row, anchoring means that once Bidder 1 underbids, Bidder 2 and Bidder 3 are likely to follow, and vice versa. This likely had as large of an impact on observed Underbidding than any of the factors above.

7. To correct for underbidding, consider a few things.
A)Try NOT to get anchored by prior bids. They are likely too low.
B)Consider increasing your planned bid by a blanket 10% to correct for underbidding. You can tweak that 10% up or down as circumstances suggest.

8. Also, underbidding has increased over the years. My book manuscript discusses this, but in the meantime, here is an interesting 3rd party study.
thenewstack.io/behavioralist-…

9. Underbidding in real life: If contestants on TPIR underbid when it is not in their best interest to do so, imagine how much stronger these forces are in the real world. Sellers of goods and services need to work to undo these factors if they are going to get full value.

10. Sellers of goods and services need to familiarize consumers with their products, clarify the value of their brands and features, and not let buyers get too accustomed to sales prices.

11. If you liked this thread, give me a follow @PopCultureMath. Let me know your thoughts below!

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