Auction Houses with Hidden Reserves

[spacktrack]

I agree that not disclosing an item has a reserve is poor form, and publishing price realized in those instances where an item actually did not sell is wrong, but I just wanted to drop in a point of clarification as REA uses reserves so very infrequently that it may not be top of mind how exactly they're used here. (For those curious, REA offered 20,312 lots this year and only 38 had reserves.)

REA does not ever place bids on a house account, in any circumstances, and does not ever move up a bid to one increment below a reserve amount to simulate interest in a lot.

If an item has a reserve, it is noted on the item page and the status will not change until the reserve is met. If an item has a $10,000 opening bid and a $25,000 reserve, but bidders only bid up to $20,000, that will show as the last bid with the reserve not met and the item will not sell. Similarly, if an item gets the $10,000 opening bid, that will show as the last bid and the item will not sell. REA does not move the bid up to $24,500. Reserve amounts are always available upon request.


In our terms, these issues are addressed:

10. Each item in the auction is accompanied by an opening bid. Select items may have a confidential reserve placed on them by the consignor. These
items will be clearly designated as such on the individual item pages online. Until such time that the confidential reserve is met, the item page will
display “Reserve Not Met” directly underneath the current bid. Bidders may continue to bid on such items using all available bid increments. Once
the confidential reserve is met, the status of the item will change to “Reserve Met” on the item page. Reserve amounts will not be disclosed on the
item page but are available upon request. Items with a confidential reserve may be accompanied by an estimated value. The confidential reserve
amount will be lower than or equal to this estimated value.

13. There is no circumstance under which Robert Edward Auctions may execute bids on its own “house account,” thereby unfairly competing with
bidders. In fact, to be clear, Robert Edward Auctions does not even have a “house account,” unlike many other auctions.


Brian

[Peter_Spaeth]

It has always seemed to me that if a consignor only wants to sell at a certain minimum price, the simplest and most direct way to achieve that is to start the bidding there. But nobody ever seems to want to do that.

[Prof]

Originally Posted by Peter_Spaeth

It has always seemed to me that if a consignor only wants to sell at a certain minimum price, the simplest and most direct way to achieve that is to start the bidding there. But nobody ever seems to want to do that.

I assume it's a psychological ploy to start below the minimum price because it will entice people to believe that they can 'get a deal.'

That way, you get a handful of bidders who've put in a bid below the minimum, and now they're all emotionally invested in the item... which leads to bidding wars and a final price above the minimum.

Just starting at the minimum price will induce less action, and just have people going, "Yeah, that's market value. Not exciting/I can find that elsewhere."


I'm in favor of just starting bidding at the minimum acceptable price for the seller. Weed out some of the drama. But, people love drama.

[Peter_Spaeth]

Originally Posted by Prof

I assume it's a psychological ploy to start below the minimum price because it will entice people to believe that they can 'get a deal.'

That way, you get a handful of bidders who've put in a bid below the minimum, and now they're all emotionally invested in the item... which leads to bidding wars and a final price above the minimum.

Just starting at the minimum price will induce less action, and just have people going, "Yeah, that's market value. Not exciting/I can find that elsewhere."


I'm in favor of just starting bidding at the minimum acceptable price for the seller. Weed out some of the drama. But, people love drama.

No doubt you are right about the reasons for not doing it that way.

[Aquarian Sports Cards]

Originally Posted by Peter_Spaeth

It has always seemed to me that if a consignor only wants to sell at a certain minimum price, the simplest and most direct way to achieve that is to start the bidding there. But nobody ever seems to want to do that.

Partly auction psychology. People feel a sense of ownership on items they bid on, so you want a lot of bidders. The other part is end of auction. If you have a $12000 item where you start the bidding at $10,000 you shut a lot of people out of extended bidding. If you start it at $25 with a $10,000 reserve you'll have a lot more eligible bidders (all this is based on only previous item bidders being eligible in extended bidding) Of course you could always start it at $25 with no reserve and trust the process, but who would do that?

[Rhotchkiss]

Brian, my bad. I corrected my initial thread. Regardless, the point remains true that how REA handles reserves if fair and ethical, unlike other AHs who use hidden reserves.

[mrreality68]

Originally Posted by spacktrack

I agree that not disclosing an item has a reserve is poor form, and publishing price realized in those instances where an item actually did not sell is wrong, but I just wanted to drop in a point of clarification as REA uses reserves so very infrequently that it may not be top of mind how exactly they're used here. (For those curious, REA offered 20,312 lots this year and only 38 had reserves.)

REA does not ever place bids on a house account, in any circumstances, and does not ever move up a bid to one increment below a reserve amount to simulate interest in a lot.

If an item has a reserve, it is noted on the item page and the status will not change until the reserve is met. If an item has a $10,000 opening bid and a $25,000 reserve, but bidders only bid up to $20,000, that will show as the last bid with the reserve not met and the item will not sell. Similarly, if an item gets the $10,000 opening bid, that will show as the last bid and the item will not sell. REA does not move the bid up to $24,500. Reserve amounts are always available upon request.


In our terms, these issues are addressed:

10. Each item in the auction is accompanied by an opening bid. Select items may have a confidential reserve placed on them by the consignor. These
items will be clearly designated as such on the individual item pages online. Until such time that the confidential reserve is met, the item page will
display “Reserve Not Met” directly underneath the current bid. Bidders may continue to bid on such items using all available bid increments. Once
the confidential reserve is met, the status of the item will change to “Reserve Met” on the item page. Reserve amounts will not be disclosed on the
item page but are available upon request. Items with a confidential reserve may be accompanied by an estimated value. The confidential reserve
amount will be lower than or equal to this estimated value.

13. There is no circumstance under which Robert Edward Auctions may execute bids on its own “house account,” thereby unfairly competing with
bidders. In fact, to be clear, Robert Edward Auctions does not even have a “house account,” unlike many other auctions.


Brian

Agreed Brian and that is why REA is one of the most respect AH's and gets some of the greatest items to auction