Posted By:
JoannI don't necessarily think that a sell price at auction is the market price even for that day. It may be literally true, but if the price is way low compared to normal, then it is still below market price. All systems have noise in them, and having a low price on a given day can be considered the market price that day or, more precisely, the fact that on that day there was downward noise in the overall market price.
Negative noise can (and noise does, by definition) come from random and unpredictable factors. Maybe it was tax day or maybe the banks closed early or maybe someone got a flat tire and missed the auction or maybe some stock went nuts that day and people put their money there instead. Who knows?
If T206 Cobb Reds PSA 4 sell 6 times in the BST in two months and they go for between $1350 and $1600, then the market price is probably somewhere around $1450 give or take. Put a PSA 4 Cobb Red on ebay at about the same time, and it might go for $950 because of the noise in the system.
In general sellers would like to avoid being caught by this noise. If something is generally worth around $3mm, the seller would probably insist on being protected from having it accidentally go for $1.8mm. The bigger the dollar value on the item, the more important it becomes.
So I really can see why sellers would insist on, and auction houses would provide, some guarantee against getting socked by random noise on a given day.
BUT - I am completely in agreement that the practice should be disclosed. David RC hit it right on the nose. Sometimes valuations are not that clear, and a bidder may have a price in mind. But in the heat of the moment in an auction, when someone has many factors to simultaneously consider in a matter of moments, believing that at least one other person has valued the object near or slightly higher than the bidder's preconceived maximum almost certainly is part of the quick mental equation.
If someone is thinking $3mm max on something, and has been bidding and getting outbid through the $2mm's, if the "other bidder" bids $3mm I can easily see the bidder deciding in that moment that maybe $3.3mm is also reasonable and raising a paddle. Now he's $300K over his predetermined maximum even though the only other person that valued it that high was, in fact, the seller.
It's not easy either way. At some levels, sellers need to be protected from the randomness of noise (not at my level mind you - I seem to get caught by it every time I list something on ebay!). But the practice should be disclosed so that any given bidder clearly knows whether his mental valuation is his alone, or is shared by one or more other people. It's part of his mental juggling, and that point should be clear.
Joann