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Posted By: J Levine

My understanding of game theory as applied here is rather limited. The idea that people bidding in large auction house's auctions tend to bid more and more often is less game theory than socio-economic theory.

Large auction houses tend to garner higher bids (re:PSA 10 Leaders card) for several reasons. #1 reason is a large auction house is insured and has a reputation and many high end (read as people with large sums of money to spend) would rather go through a large auction house as opposed to ebay or a "street" sale for that reason. They know and trust the auction house who actually has the card in hand. Trust is huge when making any large purchase. Sothebys, Mastro, REA, etc. all cater to this and make sure that they try to have a spotless record. Socio-economic theory suggests that people will take less risk the larger the sum of money they spend. Haven't we all bid that $1 on a risk auction with low feedback...how many of us are willing to bid $22,000 on a low feedback unknown seller?

In response to the appreciation value...Peter states that it is a zero sum equation. This really is not true. Taken as one equation = one transaction, this is true. What is not true is that this is not an isolated transaction like buying a truck. Baseball cards are not static and do not generally go down in value. What helps the auction houses is the long term. Cards, paintings, art, etc. tend to go up in value. Cards, art, etc. all tend to be sold again and again (granted the timescale may be huge as well). Now what makes the big auction houses tend to really make money is auctioning the same material over again. Granted it does not happen often but if the auction house makes one transaction (for arguments sake- a Baltimore Ruth) and later the card sells through the same auction house, they make more money off the same assest. Rarely do they sell for less. This is how the equations do not end up as zero sum. I also won't go into the discrepancy between seller and buyers fees and how that figures into an auction house making money.

It has been literally 20 years since I did this kind of thinking in college and teaching first grade really does not require higher level math and theory so if it does not make a lot of sense that is your reasons. If it does make sense, I will be shocked.

My two cents,

Joshua