Originally Posted by benjulmag
I will add that there are aspects of this rule that trouble me. As some of the posts suggest, likely many/most people did not thoroughly read the auction rules and were unaware of the right of the AH to bid up to a secret reserve. I know I was unaware of the rule until after the auction closed and I saw the lot passed. It certainly was not something I was familiar with.
The AH does say it sets this secret reserve before bidding starts, and it is imbedded into the software. But what is to prevent the following?
The AH has a financial interest in an item. Before the bidding starts it sets a crazy reserve, something that almost certainly the market cannot support. Then the AH places bids up to this reserve, and at the close of the auction announces the item did not sell. Unless people knew that the rules allow this, the market will be left with the impression that the market price was the last bid placed.
In the case at hand, people apparently (and not unreasonably unless they studied the rules in advance) felt the card had legitimate bidding up to $1M. Maybe it did. But maybe the last highest real bid was $500K, and maybe even that bid might have been to top a house bid. We simply do not know.
For me bidding on such an item, even being aware of the rules, I will never know that my bid reflects a real market bid, and that if I were to want to resell the item that I could come close to getting my money back.
I wonder whether this business model really obtains the highest price for a item in the instance that people are fully aware of what the rule allows. One incentive for people to bid is the belief other people have interest at that level. If that assumption is put into question by widespread knowledge that any bid, no matter how high, might be nothing more than a house bid placed to support a hidden reserve, people might be reluctant to bid. In contrast, if bidders are not generally aware of this practice, the rule can generate very high prices, prices that otherwise might be unobtainable. So I suppose it all depends on how knowledgeable bidders are about the rules.
In saying all this, I am in no way saying or implying there was any ulterior motive on the part of MHCC in how they ran this auction or set their rules, or that they wanted no more than to get the best price they could for their consignor in accord with fair market practices. I only know I was surprised to read the item passed at the last recorded price, and when I then read the auction rules, they were not what I expected or was familiar with. Had I decided to bid high enough to win the lot, and then learn that for all I know the next highest real bid was at half the level I bid, I don't think I would be too happy. Yes, I could have read the rules. But still...….
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