Auction

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Identification

The auction is a difficult negotiation process as there is an element of loss of control due to the sample set of market participants. It places the buyer and seller against one another, potentially in an enormous group, such as an online auction. If the item is viewed as a scarcity, this leads to price inflation risk. Emotions combined with competition can yield absurd results.

Example

Consider a house on the market with multiple buyers bidding against each other.

Solution

The best way to deal with the auction dynamic is to do your homework. Prepare with market data. Arrange the time, place, and manner of auction to limit participants. You can test the market with small openers and gauge the response.

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