Some popular reality television programs follow people who buy the contents of abandoned storage lockers at public auctions. In most cases, several storeage lockers are sold in sequence during a particular auction. Occassionally, one of the buyers will purposefully bid much more than the expected value of a particular storage locker in order to intimidate the other bidders. What is a plausible explanation for these excessive bids?
A) The buyer is trying to establish a reputation that may affect the outcome of later auctions.
B) The excessive bids may be rational if they occur during the last auction of the day.
C) The bidder is trying to establish a first-mover advantage, but only if they occur during the first auction of the day.
D) The excessive bids represent a form of tacit collusion among the buyers.

Question

Quizplus · Accepted Answer

The buyer is trying to establish a reputation that may affect the outcome of later auctions. By making excessively high bids, the buyer may intimidate other bidders and establish themselves as a serious and wealthy buyer, which may make other bidders less likely to compete with them in future auctions. This could give the buyer an advantage in future auctions by reducing competition and potentially allowing them to purchase lockers at lower prices.

Some Popular Reality Television Programs Follow People Who Buy the Contents