There is a great article today from Alex Goldfayn today in McClatchy Tribune papers, like the Sun Herald in Mississippi:

The Sun Herald ¦ 08/27/2006 ¦ Starting price is key in eBay auctions

It quotes some recent research from the Kellog School of Management, including Associate Professor Adam Galinsky on the behavior of buyers in auctions.

Now, as someone who has been selling on eBay for over 8 years, and working for the company since early 2003, the conclusions of this study are fairly obvious. It turns out - yes, it’s true - that auctions that start with lower starting prices result in higher final sale prices.

Why is this interesting? Well, it turns out one of the staples of modern negotiation theory and behavior finance is the concept of anchoring. Anchoring, loosely defined, is the irrational human process where people will gravitate towards a number - any number - and use it as a sub-conscious basis for what they consider a fair price.

Example: it has been shown time & time again that the higher the original price quoted by a salesperson, the higher the final price that the buyer will end up paying for the exact same item.

Even more disturbing, experiments have shown that even quoting random numbers, like the last four digits of your social security number, can actually affect the answer the people give to seemingly unrelated questions, like estimating the number of doctors in New York.

What’s interesting about this research in relation to eBay is that you would expect, based on anchoring, that the higher the auction start price, the higher the final price of bidders.

However, what the Kellog research shows is that there are other, more important emotional factors in auctions. The low price lowers the “barrier to entry” for people, and then once they are involved, they continue to bid based on the “sunk cost” of their time spent already on the auction.

I personally believe a third factor comes into play with auctions, which is competitiveness based on a false sense of ownership. People find an item they like, and that message, “You are now the high bidder” is powerful. Getting the message that you have been “Outbid” is inflamatory - it signals a primal part of your brain that triggers fear and anger that someone has “stolen” your item away from you.

I think that there has been so little academic research on the largest and more varied global marketplace (eBay), so I love to see these papers that trickle out that begin to help scratch the surface of understanding how human beings interact with each other in marketplaces other than the stock and commodity markets.

Please, if you see other research like this, send me links or documents. I find this type of analysis incredibly interesting.

A lot of press today about Eric Schmidt, CEO of Google and alumnus of Sun & Novell, joining the Board of Directors of Apple Computer.

http://www.appleinsider.com/article.php?id=2003

Everyone is a buzz with implications of what happens if these hot hot hot companies join forces against Microsoft. As you can tell from my sarcasm, as usual, I think the press is sensationalizing a fairly mundane corporate event here, just because putting Google & Apple in the title of articles gets readers these days.

Don Dodge potentially gives this idea more credit than it deserves, but provides a really thorough explanation on why we shouldn’t count our merger chickens before they have hatched.

Of course, if you look closely at any two big internet players these days, you can find synergies:

• Apple.com has a lot of traffic
• The Safari browser has 3% marketshare and growing
• iTunes is the winner in the online distribution of music
• Google is the winner in market share for natural search
• Google paid search economics are currently the best available
• Google Video is a player in the nascent digital video market

However, this announcement has a lot more to do with the fact that Steve & Eric run in the same circles, have a lot of common friends and beliefs, and of course, Google & Apple are both great consumer internet brands. It looks good for Eric & Google to be on the board of Apple, and it looks good for Apple to have Google & Eric on board. Simple.

What is interesting to me, however, is how much better Google is doing handling the mantle of “Leader of the EBM Club” (EBM = Everyone But Microsoft). This has been a dangerous baton to hold, and many formerly strong companies have been destroyed this way. But Google has learned a thing or two about how to proceed here, and it is interesting to watch the next round of the “let’s try to topple Microsoft” game.

It’s different this time, of course. Google & Yahoo both are giving Microsoft fits, so the three-way dynamic is immediately more interesting. Success by new entrants (MySpace, Facebook, YouTube) keep changing the game. The resurrection of Apple continues to astound veterans. And as eBay has shown recently, the other internet powers will weigh in and influence this game. This is a very exciting time to be in the Internet space.

I remember in the late 1990s when Netscape had this mantle, and completely failed to appreciate the responsibility. They largely shunned Apple. Their arrogance got in the way of a deal with AOL (ironic, given the later merger).

There was a time when Netscape had all the market share you could want, but Microsoft clawed their way into a significant minority (25-30%). Then with one deal (the infamous AOL deal to use Internet Explorer), they flipped to majority marketshare and never looked back.

I bring up this story because shunning Apple was not about marketshare, although at the time Macs were still disproportionately strong in Internet market share because they come with networking out of the box, and because Macs were strong in the university & high income demographics (early adopters of the web).

Apple is the Grandpa of Microsoft battles of yesteryear. It is still a thought leader on imagining a world where you DON’T need a DOS/Windows PC. Their audience, though small, are thought leaders - disproportionately represented by the creatives, the journalists, and the executive ranks. They are also cooler than most.

By linking their name with Apple, Google in some ways gains a small, but powerful ally. Like a chapter out of The Lord of the Rings, it makes people think maybe this new champion will succeed against Microsoft where others have failed.  The prophecy fulfilled.
The baton is passed.

I’ll post another time about why I think the question of Google vs. Microsoft is likely the wrong one. The Google ethos isn’t about killing Microsoft.  In the end, this is much more about future growth opportunities for Microsoft than any type of defeat. But in our market-based economy, growth is power, so it’s worth talking about… another day.

Thanks to Mark Cuban for finding this blog post from Rahool Sood, President of Voodoo PC. This is a ridiculously good example of how a company blog can be a great marketing tool. Reading this post (and having no real interest in high-end PCs) makes me want to get to know Rahool and his company better (which ultimately is what great marketing is about).

The post is a good yarn about Rahool’s conversations with Michael Dell, and his opinions on Dell and Apple in the high-end PC market. What comes through clearly is Rahool’s passion for his company and for his customers. It personifies Voodoo for me as a company that really cares about its target customer segment, about being as cutting edge as possible, and investing heavily to be so, and provides substantiation for the high-price points of their product. Rather than feel ‘cheated’ by the high price of a Voodoo system, I walk away from this post thinking that IF I bought a Voodoo, 1) I’m buying into something valuable because of the R&D investment and 2) that Voodoo’s customer service should be top-notch (given how passionate the President of Voodoo is about his product and customers). All this from a blog post…

UK Auction Info
Pictures of some of the world’s best loved fairytales will go under the hammer at a Cambridge auction house.
The Fine Art Sale at Cheffins includes several works by Edward Ardizzone, inspired by master storyteller Hans Christian Andersen.
Classics like The Emperor’s New Clothes, The Little Mermaid, The Ugly Duckling and The Snow Queen are […]

Australian Auction Info
Escala Group Inc., a collectibles company and auctioneer, said Monday it sold $17.6 million of rare coins and other collectibles at auction during the World’s Fair of Money in Denver.
Bowers and Merena Auctions, a part of the company’s Spectrum Numismatics division, conducted the coin sale between Aug. 16 and Aug. 19.
Shares of Escala, […]