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Internet Auctions vs Live On-site AuctionsThere are two main differences between online and live auctions. First, less information is available for bidders in online auctions. In a live auction, bidders inspect the item at the preview exhibition and can often ask questions of the auction-house experts present. In an online auction, bidders get only what information is posted on a web page. The fuzziness of pictures on a computer screen means an online bidder’s information is limited.Second, transaction costs are typically higher in live auctions. Online, the seller’s costs are established by the online service they use. In live auctions, the auctioneer pays the costs of mounting the pre-sale exhibition and in running the auction itself. The seller must wait until a suitable auction date has been scheduled. Bidders have negligible transaction costs online, whereas to bid live they incur travel and other participation costs. Any seller choosing between auctioning online and live, then, faces a tradeoff. On the one hand, the costs to the seller and the bidders of participating are lower online. On the other hand, online bidders, worrying more about the the quality of the item and the costs of shipping. The internet has made markets more efficient by making it easier for buyers to learn what is available and for how much but, ultimately, bidders are better informed about the asset’s value in a live auction than an online one.
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