Optimal Lot Sizes: Individual Auction Items vs. Bulk Sales

Lot-sizes are one of the key decisions affecting the outcome of an auction.

Small lot-sizes tend to induce bidder competition and yield higher selling prices, particularly when dealing with a variety of assets and those that appeal to wide audience. However, it requires greater resources to break assets down into small lot-sizes.

Market - Local end users vs. national dealers

Quantity - The more you have of the same thing, the better it is to bulk up.

Difficulty - For setup and removal.

Distance - The further away, the more you have to pay for setup. Buyers have to pay more for transportation, so they need bigger loads to justify expense.

Time for removal -

Dealing with lots of bidders -

Seller's expectations

 

Individual items typically appeal to retail customers, or end-users.

Bulk sales are attractive to wholesalers and dealers.

 

If you are selling assets for which there is limited demand, or if you are selling a whole bunch of identical items, then it may be much more effective to create large lots sizes.

the optimal lot size increases with inventory holding costs and number of bidders.

 

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