Why are auctions so popular?

[T206Collector]

There is a perception that if you buy a card at an asking price that you must have overpaid for it. When you buy at auction, you are (shilling aside) buying the item at a nominal increment above the next highest bidder. It is a closer approximation of true market value at that moment in time and under those circumstances. That is why auction values are most useful in determining markets (VCP, card target, etc.), and why triggered BINs only tell you what one person was willing to pay at a certain point in time.

I recently had a guy try to sell me a card I valued at $50 for $250 because that was what he paid for it in a private sale. That $250 is an irrelevant number unless there was someone also willing to pay $240 for it. You'd like to know there may be other potential buyers out there for your card than the seller himself, who is getting out of the market on that card.

I assume this phenomenon would hold true for all scarce collectibles, where markets can more easily be determined at auction than in private sales. The rise in small auction houses exists in response to the decline of eBay as a global auction house.