The other principle used by auctions is that of “social proof”. We all tend to take the lead from other people; if everybody does something, or says something, most of us join in before we think about what we really should do. Auctions put you in intimate contact with other people who are all providing social proof that the sale item is important and valuable.
A final ingredient in the magic-spell cast by auctions was uncovered by researchers from Princeton. Their experiments asked volunteers to play on-line auctions with different rules. Some of these auctions had rules that encouraged over-bidding (like typical open auctions, which most of us are familiar with from movies), and some had rules that encouraged rational behaviour (like the eBay structure). With enough guidance from the auction rules, the bidders didn't end up paying much more than they originally thought was reasonable - but only if they thought they were bidding against a computer programme. As soon as the volunteers thought they were bidding against other live humans they found it impossible to bid rationally, whatever the auction rules.
This implies that the competitive element of auctions is crucial to provoking our irrational buying behaviour. Once we're involved in an auction we're not just paying to own the sale item, we're paying to beat other people who are bidding and prevent them from having it.
So it seems Gore Vidal had human nature, and the psychology of auctions, about right when he said: "It is not enough to succeed. Others must fail."