I sell items on eBay and enjoy teaching others how to make money with eBay auctions, but I admit to doing my fair share of buying, too. Recently I found a few items I wanted to add to my collection, and even though I knew the items would go for several hundred dollars, I noticed the seller began the auction price at 99 cents. Is this a good idea?

Turns out that it's an excellent idea. A recent study performed by the London Business School and two professors from Northwestern University proved that items that were posted with an opening price of one penny actually ended up selling at "significantly higher" prices than auctions for the same item that began at higher prices.

Why does this work so well? The biggest reason is the psychological impact on buyers. Everyone loves a bargain, and a price of one cent is going to get everyone's attention. Obviously the item won't end up selling for that price, but it does tend to get more attention. Let's say you do a search on Nikon cameras (one of the items included in the study). You see 20 of them, and one of them has a price of 99 cents. Even though you know you're not going to win the auction with that bid, you're very likely to click on the listing. And as an eBay seller, we know that the first battle is to get potential buyers to look at your listing!

There's always an exception to the rule, and according to the study, if you're selling a "niche item" - an item that is intended for a specialized audience that you're not expecting a great deal of bidding on - then you should start with a price closer to what you actually expect to get.

Even if you're concerned about getting less than you hoped for, don't try to lower the price on the item by making it up with shipping overcharges. I've seen sellers put a "Buy It Now" item up for a couple of dollars less than other sellers, but they were charging $7 to ship something that should have cost no more than $2. eBay is also starting to crack down on shipping overcharges, and even if that proves to be ineffective, I can tell you from personal experience as an eBay buyer that your customers will never forget being overcharged for shipping - and there's a good chance that these overcharges will stop them from becoming your customers to begin with!

Aim for a fair profit, price your items accordingly, and you'll be on your way to making money with eBay auctions.

Just as your item description and starting price affect the number of bids you get, so does the timing of your posting. We'll discuss that tomorrow in my next eBay home business tutorial!