Auction Question - Silent or Secret Reserves?

[ajw]

Hey, I don't post here often, but lurk from time to time. I bid on auction house items rarely and know that many of the readers here are much more experienced than am I. I have a question. Well, three, really. (It's possible I'm using the wrong words, so let me know if the concepts I'm describing have accepted terms.)

First, how common is a "silent reserve" where the description says there is a reserve but does not say what that reserve is?

Second, how common is a "secret reserve" where there is a reserve but the description says nothing about it whatsoever?

Third, what do you think about them? Are they ethical? Would you be less willing to bid if you knew about them (or knew that the auction house used them at times)?

Thanks a bunch for any input you might have...

Drew

[Matt]

Part of the issue is how the reserves are executed - when you bid and it is below reserve, are you told that your bid did not meet reserve, does another higher bid automatically get entered giving the appearance of another real bidder or is nothing known about whether or not reserve is met until after the auction.

[glchen]

Personally, I'm fine with secret and silent reserves, and I think they're completely ethical as I understand that a consignor may not want to sell for a major loss. Saying that however, I wish that they would state the reserve, so that I can determine whether or not I am able to meet the minimum price that the consignor wants on a lot. Silent lots are very common in ebay. When this happens on a lot I'm interested, I often email the seller to ask what the reserve is, and they usually answer it. I wish I could do this with auction houses. Secret reserves are less common, but I saw many lots that had that in the last Hunt live auction.

[Leon]

Personally I don't care for unknown reserves and I hate secret (not even knowing there is one at all) ones even more. In today's economy and hobby there is no doubt they are sometimes needed. No problem there......I just don't like shooting at an unknown target or even worse yet, no knowing there is a reserve whatsoever. As for being ethical? I think so, if communicated correctly. BTW, running a small auction company, this is the way we do it too. Though we usually decide to just start the auctions at the reserve price, therefore, there are safeguards for consignors but no secrecy (or technical reserves) involved. I can also see the point of letting bids happen before revealing a reserve, if that is the preferred methodology. "Action" on items is a good thing and a later revealing allows that to happen. Just my opinion. regards

[HRBAKER]

It is kind of really a fixed price sale with the fixed price hidden and the opportunity to pay more if you so desire.

[M's_Fan]

I've noticed auctions with hidden reserves end far below the going rate for the card in an auction without a reserve. I think this is because when buyers see the reserve, they move on and don't waste their time. With so many auctions going on its simply not worth spending a lot of time to see if the card will finally meet its reserve.

In the same vein, a card with a low starting reserve will most often attract interest and bidding action and end up at a reasonable and higher price than a card with a higher starting reserve.

[Exhibitman]

The cynic in me would respond that many auctions already have hidden reserves--shilled bids.

As to whether true hidden reserves are ethical, if they are in conformity with the law they are ethical as far as I am concerned. The issue is whether they are legal, and that depends on the state law where the auctioneer is located, as does the manner in which a reserve must be stated, used, etc.

Assuming they are legal, there are reasons not to state the reserve and not to start the items at the reserve. If the reserve is not known or stated, or is bid in at the end of the auction (as Heritage does), it encourages people to bid. It also lets the auctioneer and consignor gauge where the true strength is on the item, which may lead to a post-auction sale if the consignor is interested in waiving the reserve and the bidder remains interested in the item.

I am in a minority here as I do not let the presence of a reserve affect my bidding--I bid what I want to pay and do not try to outthink the auction. Not because I have any special insight: I'm just lazy.