Quote:
Originally Posted by Hankphenom
Maybe PT Barnum was right, but it's hard for me to see how any strategies that involve attempting to fool or manipulate bidders will benefit AHs or their consignors in the long run. Perhaps the demand for stuff is inelastic, as an economist would put it, and impervious to any of the normal restraints of the free market. But I would still want some proof that the smarter approach overall isn't to treat bidders with the respect they deserve as the ones who ultimately foot the bill.
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FWIW, the fact that the major auction houses (
e.g., Sothebys, Christies, etc.) across all fields of collecting employ the method of hidden reserves with the house being allowed to secretly bid up to the reserve, suggests to me this method works in achieving the highest prices. That it might piss off some bidders who will therefore not bid is more than offset by the higher prices it generates among those bidders who participate. Conceptually it makes sense it would work, as it reduces the number of bidders required to achieve the desired price from two to one.
In regard to the demand curve, for the most desirable items it is very inelastic. Because of that, bidders who really want the item will knowingly choose to take the bait and bid, fearing that, even though unlikely, if there is that "real" second bidder, they will have no chance of buying the item after the auction.