The Leon Luckey Type Card Collection – Bidding Ends on Thursday - August 13, 2015

[Peter_Spaeth]

Originally Posted by T206Collector

Whether all, some, or most collectors choose to include the BP in their bidding activities, the auction houses that separate the BP from the bid are trying to anchor the bids at a lower value than what is being spent so as to encourage additional bidding. It is a ploy. Whether it works or not is in the eye of the beholder.

And your evidence for this is?? Your say-so? And if you are accusing auction houses of attempted deception, why don't you name the ones you think are guilty?

[nolemmings]

I don't have any problem following the logic of his argument Peter, with or without empirical data to back it up. Again, if the BP has no influence on final price or bidder's behavior, why is it that no auction house, as in none, does away with it and take its cut from the seller/consignor? Consignors really should have no rational problem with that if their bottom line is the same right?

[Peter_Spaeth]

Originally Posted by nolemmings

I don't have any problem following the logic of his argument Peter, with or without empirical data to back it up. Again, if the BP has no influence on final price or bidder's behavior, why is that no auction house, as in none, does away with it and take its cut from the seller/consignor? Consignors really should have no rational problem with that if their bottom line is the same right?

Industry custom and practice, Todd. Nothing to do with trying to deceive buyers. As I recall seller's premiums used to be much more in vogue. At some point someone probably had the notion that they could compete for consignments better by advertising a lower seller's premium and others followed suit. That is what this article from an art site suggests, even though of course the issue for the consignor really is the total premium not the seller's premium.

"The buyer's premium is the fee added to the hammer price at auction, but don't be fooled by the term - it's really paid by the seller. Buyers decide how much they want to pay, and take off the premium to work out the maximum hammer price they're willing to bid. If the buyer's premium increases, they compensate by reducing the hammer price they are willing to pay. If a dealer is willing to pay £20k for a picture bought directly from a collector, they're not going to pay £25k for the same picture from auction because there's a 25% premium - the dealer can't sell for a higher price just because they had to pay a buyer's premium.




The seller is paying for the auction house for its services. A higher buyer's premium means that the seller will receive less of the proceeds - so if you're selling through an auctioneer, focus as much on the buyer's premium as on the seller's premium. Over the past few decades there has been a shift from charging seller's premium to charging buyer's premium. Indeed, the average premium income at Sotheby's (buyer's premium plus seller's premium) was just 16.6% in 2011 and 16.3% in 2012, according to their annual report (p.25). Sellers sometimes even pay a negative premium - i.e. they will receive a share of the buyer's premium. Christie's doesn't publish these data because it is privately owned, but I suspect theirs is a bit higher because they sell more lower-valued lots that attract a higher premium.




The shift to buyer's premium has been driven by competition to win consignments. Buyers can't negotiate - it makes no sense to agree a deal where the buyer pays a low premium, but the underbidder would have been charged the full premium. Negotiation takes place with sellers."

[ALR-bishop]

If I was an auctioneer I would separate it, whatever the level, to show the seller he will get the full amount bid. But I am just a buyer and the premium does not matter to me as long as I know what it is. I am not trying to convince anyone this is the best way to look at it. It's just how I look at it. Not sure there is a right or wrong answer here. To each their own way of looking at it

[T206Collector]

Originally Posted by Peter_Spaeth

And your evidence for this is?? Your say-so? And if you are accusing auction houses of attempted deception, why don't you name the ones you think are guilty?

Seriously? Well, okay. Here's some basic research and empirical data on the topic:

"Morwitz et al. (1988) found that auction bidders agreed to pay more in total cost in an auction when a 15 percent buyer's premium was charged separately than in one in which there was no buyer's premium. The anchoring effect observed in partitioned pricing has subsequently been replicated and extended in several studies (e.g., Bertini and Wathiey, 2008; Chakravarti et al., 2002)" For complete citations, click here:

https://books.google.com/books?id=22...horing&f=false

[T206Collector]

The entire Morwitz article is available here:

http://www.researchgate.net/publicat...tioned_Pricing

[Peter_Spaeth]

The starting point of our investigation has been the fact that the
authors of existing studies on effects of price partitioning came up
with contradictious findings. Our study was intended to have a
closer look at the mechanisms which underlie price partitioning
effects. The results of our study show that price partitioning leads
to a more favorable evaluation of the total price level, but to a higher
perceived complexity of the price structure and to a higher perceived
manipulative intent of the marketer than does using total
prices. The overall effect of price partitioning on product evaluation
proved to be negative compared to using total prices which is due
to the fact that the negative effects of price partitioning through
perceived complexity of the price structure and manipulative intent
outweigh the positive effect through the evaluation of the total price
level. The contradictious findings of previous studies might be
traced back to the fact that the authors did not analyze all of these
paths. Thus, summing up our results, we can say that marketers
should not use partitioned prices because the disadvantages of this
pricing technique outweigh the advantages. Provided that a marketer
has to use partitioned prices for some reason (e.g. because
partitioned prices are common or regulated by law in his industry),
we can derive from our findings that monetary surcharges should be
preferred over percentage surcharges because when applying monetary
surcharges, prices are perceived as being less complex and the
marketer is supposed to have a lower manipulative intent than in the
case of percentage surcharges.
http://www.acrwebsite.org/volumes/v3...r_vol35_30.pdf

[Econteachert205]

So doesn't that mean they shouldn't use buyers premiums because Morons like me think we're being ripped off by it?

[T206Collector]

Originally Posted by Econteachert205

So doesn't that mean they shouldn't use buyers premiums because Morons like me think we're being ripped off by it?

At the grocery store, yes. But, in the auction market the evidence is to the contrary.

[Econteachert205]

Originally Posted by T206Collector

At the grocery store, yes. But, in the auction market the evidence is to the contrary.

Hahaha. I really think a big part of it is the two worlds of auctions. I have always hung around auctions where a few hundred dollars is a lot of money. Unsophisticated junk dealer types and middle class moms looking for collectibles. I get that at the high end people get what the overall cost is.


By the way, sophisticated investors understand brokerage fees but retail folks sure do not.

[Peter_Spaeth]

One 1988 or whatever it was study of one auction doth not science make. And i see no reason why the newer study wouldn't apply to auctions, buying is buying. In any event, I do not believe that buyer's premiums are charged by sports auction houses with an intent to manipulate the buyer into bidding more. I think it's much more likely a response to a trend which saw auction houses trying to compete by lowering seller's commissions, however irrational that was. Paul if you think otherwise, why don't you name the ones you think are trying to trick us? Or do you think it's all of them, making a conscious choice to try to trick us?

[T206Collector]

More from the 2009 Morwitz article, which is really fascinating reading:

With respect to eBay strategies...

"While the results varied for high versus low total reserves, across the two products, and across particular CDs and games, in general they demonstrated that auctions with lower opening bids and higher shipping charges attracted more bidders, and generated higher total revenues, compared to higher opening bids and lower shipping charges. For example, setting an opening bid of $0.01 and shipping of $3.99 for CDs resulted in a higher average number of bidders (4.5) and revenue ($10.14) than setting an opening bid of $4.00 and no shipping charges (3.9 bidders, $7.54 average revenue)."

[T206Collector]

Originally Posted by Peter_Spaeth

The starting point of our investigation has been the fact that the
authors of existing studies on effects of price partitioning came up
with contradictious findings. Our study was intended to have a
closer look at the mechanisms which underlie price partitioning
effects. The results of our study show that price partitioning leads
to a more favorable evaluation of the total price level, but to a higher
perceived complexity of the price structure and to a higher perceived
manipulative intent of the marketer than does using total
prices. The overall effect of price partitioning on product evaluation
proved to be negative compared to using total prices which is due
to the fact that the negative effects of price partitioning through
perceived complexity of the price structure and manipulative intent
outweigh the positive effect through the evaluation of the total price
level. The contradictious findings of previous studies might be
traced back to the fact that the authors did not analyze all of these
paths. Thus, summing up our results, we can say that marketers
should not use partitioned prices because the disadvantages of this
pricing technique outweigh the advantages. Provided that a marketer
has to use partitioned prices for some reason (e.g. because
partitioned prices are common or regulated by law in his industry),
we can derive from our findings that monetary surcharges should be
preferred over percentage surcharges because when applying monetary
surcharges, prices are perceived as being less complex and the
marketer is supposed to have a lower manipulative intent than in the
case of percentage surcharges.
http://www.acrwebsite.org/volumes/v3...r_vol35_30.pdf

I agree, of course, that "the marketer is supposed to have a lower manipulative intent than in the case of percentage surcharges," but I was talking about using partitioned pricing in the auction environment. The Morwitz study cited above referenced an auction study. Whether partitioned pricing has a negative effect on the market in most other contexts is irrelevant. Frankly, if partitioned pricing worked in the grocery store then what you would see would be buyer's premium's at checkout! Imagine that!

[chernieto]

Originally Posted by Peter_Spaeth

http://www.acrwebsite.org/volumes/v3...r_vol35_30.pdf

please make it stop.jpg


& Congrats to Leon on the auction as well ( and the bidders).

Paul