Quote:
Originally Posted by benjulmag
This to me is the classic definition of market value, and I wholeheartedly agree that a realized price reflecting only one bid above a house bid or reserve price is not indicative of true market value. When the realized hammer price is the stated reserve (i.e., the item actually sells), at least in that instance the market has been put on notice what has taken place. That stands in contrast to a bid above a hidden reserve, which, even though stated in the rules as allowed to take place, is more deceptive.
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The price that an item sells for in a given auction on a given day is simply that - the price it sells/sold for in that auction. The assumption that this translates to "fair market value" completely ignores the gross inefficiencies in the market place! For it to be a true "fair market value" we would need to be certain that all willing sellers were meeting all willing buyers in the marketplace to properly see supply and demand at work. Our marketplace is not close to efficient. Add to that the fact that all 8's are not created equal and we have a huge mess. That said, I do think there is value in using a selling price be it auction or private (all of which sales are excluded from the publicly available information) as a relevant piece of information in helping to estimate a fair market value. The more data points you have will help get you closer to a more accurate "fair market value"
Onto reserves - as a result of the very same inefficiencies discussed above, auction houses who have a fiduciary duty to their consignors (NOT their bidders) sometimes agree to place reserves on items. Reserves are a double edged sword - bidders frequently shy away from items they see reserves on and don't bid on items they might actually have won if they did - so some houses choose to "hide" them. Consignors of certain items understandably are concerned that their item may not be seen by all potentially interested buyers of an item and sell below "fair market value" so request reserves. I don't see a simple solution where everyone is happy. I do agree it is poor practice for an auction house to be placing bids against legit bidders up to a hidden reserve price.