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Bill ToddEcon is one of the few classes I did not sleep through. Here's how it (supposedly) works.
Everything has utility--money, labor, goods, even ideas and values. That utility can change from time to time depending on circumstances. Examples:
You'd willingly pay more for a "common" W502 if it were the last one you needed for your set.
You're willing to work 8 hours a day for a certain wage, but to get you to work more than that the employer has to offer you a higher hourly rate.
In a "perfect" transaction what each party gives up is exactly equal in utility to what they receive. Both parties are aware of this. Anything that pushes the transaction in one direction or the other is zero-sum--that is, one party gains what the other one loses, and both are aware of the difference. Example:
You know you're getting hosed (gag fully intended) every time you buy gas these days.
Peter's point is (at least I think so) that the auction houses set up an environment where people willingly get pushed off that equilibrium point, and still think they came out ahead. In fact, every party thinks they came out ahead--something that's simply not possible in a strictly economic sense. How does this happen? Are the auction houses in fact adding some utility? Bragging rights? Security? Pedigree? Simple brokering? If that's the case, then who does the best job of it?
Bill