The by-bidder is known as an example of a bidding strategy that many people consider to be unethical, and in a number of locations around the world it is actually illegal. Essentially, a by-bidder is an agent by whom a bid is chosen in an auction with the express purpose of raising the price of the bids that are placed on a particular item. This activity results in motivating legitimate bidders to place higher bids and this will surpass the offers submitted at part of the by-bidder approach for having a chance at winning the auction.
The purpose of engaging a by-bidder
A by-bidder is generally engaged by the owner of the item that is to be auctioned generally for the purpose of obtaining a price for the article that is more higher than what would have been obtained otherwise. The process that is used by a by-bidder is very simple in order to accomplish this.
Reaction of Auction houses towards by-bidder
In order to make sure no one connected with the auction is aware that he or she is representing a seller for the purpose of driving up the price, a by-bidder will often go to great extremes. This is due to the reason that this process is considered to be inappropriate by most auctions and auction houses.When it is determined by an auction house that an individual is functioning as a by-bidder, it is common thing that the bidding privileges are revoked. In some cases, heavy fines are imposed on that person and there is also the possibility of further legal action.
2 forms of compensation for by-bidder
There are two forms in which a by-bidder may receive compensation for services he rendered. A flat rate might be paid by the owner of the item to the by-bidder in exchange for entering a specified number of bids at certain prices. An alternative form of payment is that, the by-bidder may receive a percentage of the winning bid amount. Generally, it happens that a by-bidder will request that at least a portion of the compensation should be given to him or her in advance, having the remaining portion due upon the successful completion of the auction or auctions involved.
