New lawsuit accuses PWCC of massive shill bidding

[Peter_Spaeth]

Originally Posted by edhans

I've never completely bought into the argument that shill bidding affects market values. Obviously if a lot is won by a consignor or someone acting on his behalf, that does artificially inflate the market value (comps) of the card(s) in that lot.

But if the lot is won by a buyer not connected to the auction house or consignor, can we really argue that the value is artificially inflated? Other than the public reporting, how is that transaction different than a buyer negotiating and purchasing the item from a dealer at a show? There is an independent buyer and seller who have agreed to a price. Does that not establish a market price? Why do we need a third party (the underbidder) to establish a market?

Perhaps I am misunderstanding the point but I don't follow. If but for shill bids I would have won a card for (say) 1000, but because of a shill bid at 1100 I was pushed to 1200, how is that not artificially inflated?

[ullmandds]

Originally Posted by Peter_Spaeth

Perhaps I am misunderstanding the point but I don't follow. If but for shill bids I would have won a card for (say) 1000, but because of a shill bid at 1100 I was pushed to 1200, how is that not artificially inflated?

I think ed's point is that the ultimate high bidder was "willing" to pay a higher price therefore it should not be "" inflated. I disagree with this sentiment.

[Peter_Spaeth]

Originally Posted by ullmandds

I think ed's point is that the ultimate high bidder was "willing" to pay a higher price therefore it should not be "" inflated. I disagree with this sentiment.

Right. Where the price of a stock is inflated because the issuer withheld material information, people are still "willing" to pay the inflated price, but that does not negate fraud. It is a non sequitur IMO.

[dbussell12]

Originally Posted by Peter_Spaeth

Right. Where the price of a stock is inflated because the issuer withheld material information, people are still "willing" to pay the inflated price, but that does not negate fraud. It is a non sequitur IMO.

again, correct. market manipulation is an objective fact. non-correlative with the subjective decision by any individual buyer to participate in said market after the fact. entirely different discussion

[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.

[jayshum]

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.

But if the sale isn't real because the high bidder was a shill bidder, then the reported values are inflated because no real buyer was willing to pay that much.

[edhans]

Originally Posted by jayshum

But if the sale isn't real because the high bidder was a shill bidder, then the reported values are inflated because no real buyer was willing to pay that much.

Yes, as I stated above.

[dbussell12]

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.

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...

[Peter_Spaeth]

Ed, suppose after the conclusion of an auction all max bids became known. Are those a better indicator of "market value" than the actual sale price? After all, they reflect what someone was "willing" to pay?

[dbussell12]

Originally Posted by Peter_Spaeth

Perhaps I am misunderstanding the point but I don't follow. If but for shill bids I would have won a card for (say) 1000, but because of a shill bid at 1100 I was pushed to 1200, how is that not artificially inflated?

yes. value is subjective, markets are objective. individuals pull from market data to correlate perceived subjective value with mass objective value and attempt to deduce best paths forward (ie 'does how i value this card correlate with how others value this card? + if so/not, how do i proceed accordingly?). if the market perception of a card value is inflated by bid pumping and does not accurately reflect 'real data' (ie real buyers) -- that is artificial inflation of market value; skews market data for a buyer's interfacing w/ subjective valuation vs market.