Quote:
Originally Posted by edhans
My main point is that a willing buyer and a willing seller should be sufficient to establish a "market value". We shouldn't require validation in the form of a third party underbidder. I don't think the presence of shill bids creates imperfect information. That is, it doesn't change what the buyer is willing to pay. On the flip side, we may conclude that some values presented in price trackers are deflated, since the buyer may have gone even higher, but didn't need to since there was no underbidder.
I do hope everyone understands that I do not condoning shill bidding. Just pointing out that its effect on "market value" may be somewhat overstated.
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what constitutes a 'willing buyer' is determined by the information the buyer has at hand to inform their decision making. a buyer can only be 'willing' with accurate and adequate information to establish what they are buying and why they are paying what they are paying to purchase said item/service. they may be willing to ultimately sell the farm for any given item. but that is case by case. it isn't a market informed decision. you see this kind of methodology in drug users and addicts, which is why studying drug markets gives you insight into the instability and fallibility of markets as a whole. they are determined by human behavior.
what a buyer is willing to pay typically (unless the buyer is uneducated or functioning a vacuum of their own imagined world) has a direct relationship with established market precedents -- ie, comparative analysis of the marketplace one is operating in. some buyers may be willing to pay far more or far less depending on their real life circumstances for any given item or service. this is exceptional market behavior. these tend to be outliers. ie someone who is willing to pay 5m$ for a carton of eggs.
market value is contextual. buyer and seller don't operate in a vacuum. both use the market environment itself to contextualize their relationship; my willingness to sell you an item and your willingness to purchase said item for any given price point and where we meet is the market environment itself, as you are observing at the ground level. but a market itself is that single relationship times 10000x.
its a logical fallacy to assume that a willing buyer and a willing seller don't take place within said context -- because all transactions occur and are weighed (again, unless buyer and or seller are uneducated, such as paying 30m$ for a penny sleeve) to be reasonable or unreasonable therein. if we were on mars and you were the only person i could buy or sell any given item from, you would determine the market value and i would either have to accede, or move on. a market is the constituent buyers and sellers of a house, a card, what have you. supply and demand is contextual unless i need your item to survive and i have no where else to acquire it from.
i may be willing to pay 10$m for your item, but if i can go down the street and get it for $5 from five other people, i'm likely not going to be willing to pay you 10$m. if you remove those other five people from the market or offer them a false sum which makes them believe their item is worth 10$m because you offered them 10$m for it and they change their prices, then i have to be willing to pay 10$m due to the inflationary imagination of the market (false buyer[s]) or else move on.
i hope this makes sense. any individual buyer may well be willing to ultimately pay 30m$ for said penny sleeve; that is their prerogative. if you create, whether by imagination or shill bidding or otherwise, an environment where fifty million buyers are willing to pay 30m$ for a penny sleeve, you've really captured peoples' imaginations...