Is there something special with this violin?


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I think so too

Many professional buyers go to auctions in partnership with other buyers. I would venture than most high-end auction lots that are bought by dealers are bought by partnerships and not individual dealers. In the case of the Christies auction, I believe there were three buyers partnering on that lot in question. Partnerships are not illegal nor are they unethical. However, pooling to avoid competitive bidding is illegal in the US. When is a partnership a pool, and when is it a partnership? The answer is that it is a partnership until it is proven to be a pool in a court of law.

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The buyer, (not me), knew what they were doing, is happy with the purchase, and did not buy a Roth.

erocca is correct IMHO...The buyer knows what they're doing and that's no Roth. No, it was not me.

The buzz is about the genuine 17th century Andrea Guarneri (lot 68) bought for the paltry sum of $55,000 plus premium against an estimate of $15000-$25000. The buyer is one of the premier experts in the world on this type of thing. With his certificate it is worth $500,000. I feel badly for the consignor.....

Jesse; buzz is just that; Buzz. There were plenty of good eyes in the room... and one or two owners of those eyes were underbidders. It was an auction... The buyer got a good buy and knows what he bought, but from what your suggesting about the market value and the ultimate lament of the consignor, your just swallowing the buzz hook line and sinker.

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erocca is correct IMHO...The buyer knows what they're doing and that's no Roth. No, it was not me.

Jesse; buzz is just that; Buzz. There were plenty of good eyes in the room... and one or two owners of those eyes were underbidders. It was an auction... The buyer got a good buy and knows what he bought, but from what your suggesting about the market value and the ultimate lament of the consignor, your just swallowing the buzz hook line and sinker.

Hello Jeff and Jesse, I know that Jesse is legally correct about pools, but am not aware of any U.S. court cases involving the violin trade concerning pools. This is because it is almost impossible to prove, along with the time any money involved. However over the years I have personally seen this happen at major auctions and with the full knowledge of the auction house. The big difference though in the many times I have been witness to this, is that all the instruments were in a much lower price range and many times the pools have been larger than 3. This of course reduces the number of serious bids and the instruments sells at at much lower price. This has been going on for many many years and will continue for many years to come. The only way to protect yourself is to have a reserve, and most auction houses will discourage you or not allow a reserve if the price is below $1500. ot

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forget the stradivari, let's just have a pool party - trust can be established during the course of the evening, the drink should help with that!

I'm relieved to hear Jeffrey saying something like what I'm saying (albeit on the other thread My link). I've only been on the scene for a couple of years, but I benefit from the experience of someone who's been in the trade for decades. I don't think stupendous bargains are to be had in the major salerooms, and knowledge is the only way to put yourself at an advantage. It helps to know exactly what you can sell before you buy it, and sometimes this is more relevant than exactly what something is. Many violins of questionable origin sell for good money because they are sale-able as something they're probably not ..... though I'm sure that wasn't the case with this Andrea Guarneri! I remember once buying a violin from a dealer (in the good old days maybe 20 years ago) - he said "I'm not selling this as an Audinot" but the price was an Audinot price and I bought it anyway because I thought he might be wrong! Once a plonker, always a plonker, I hear you saying ...

As for the fact that 3 dealers sit together, I think it's more likely that one of them had put the violin into the auction just so his "friend" would buy it ... I have certainly found myself sitting next to a fellow dealer who I was quite pally with and watched him/her buy one of my violins.

Pools - these days there is such huge demand at auction from bidders who don't really know what they're buying that a pool can only succeed in driving the price up, not in ensuring a sale to a knowing dealer. Generally every violin worth having (or not) has been fallen in love with by a player, semi-knowledgeable dilettante (like me) or armchair expert, and if a few dealers bid, that just guarantees an above average price and doesn't serve their immediate interests.

A few friendly and collaboratively-minded dealers might get together before the sale and discuss what they're interested in and come to a pragmatic agreement about who will bid on what ... there is after all no sense in just bidding each other up, and dealers generally have no burning need to possess a particular violin or bow. This behaviour could be observed and assumed to be a "pool" but it isn't.

Jesse suggests that most high-end lots are bought by dealers in partnership. All the high end lots in recent London auctions that I know about have been bought by collectors in South Korea, foundations, Chinese dealers, collectors and investors. Generally by the time a very valuable instrument with good provenance has got into a saleroom most dealers have convinced themselves it's not worth having!

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A few friendly and collaboratively-minded dealers might get together before the sale and discuss what they're interested in and come to a pragmatic agreement about who will bid on what ... there is after all no sense in just bidding each other up...

I'm actually quite befuddled by your statement here. In game theory the example you give is the very definition of collusive bidding:

"A bidder cartel is a group of bidders that decide to bid as a single entity rather than multiple bidders."

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I don't see how it puts any other bidders at a disadvantage, quite the reverse since there are less people bidding on an item, not more.

This is collusive not bidding, not collusive bidding!

Ah I see you've just edited your post for clarification. You are talking about people who collude to purchase. I'm talking about independent entities who agree not to compete over items they're not that bothered about buying in the first place ....

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A few friendly and collaboratively-minded dealers might get together before the sale and discuss what they're interested in and come to a pragmatic agreement about who will bid on what ... there is after all no sense in just bidding each other up, and dealers generally have no burning need to possess a particular violin or bow. This behaviour could be observed and assumed to be a "pool" but it isn't.

What is it then?

Surely this is the very definition of a 'ring' in which bidders collude so as not to bid against each other and keep the price low - as you say. This is unfair to the seller and is illegal is it not?

As Jesse says, there is nothing wrong with a partnership in which several people pool their money to buy something they would not otherwise purchase individually. But there is definitely something wrong with people getting together before the auction to decide which of them will bid on which lots for the express purpose of keeping the prices low. This certainly does happen, though.

Andrew

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I have to say as a buyer I've never worried about it - I just decide what I want to pay and stick to the price. If I don't get it there'll be another along soon ....

I can imagine that if all the pros in a saleroom got together that would be a restrictive practice - in fact I remember thinking that used to go on at Edinburgh antique sales, where all the dealers were local and knew each other. But at a big international violin sale a "bidding ring" as you describe it will have zero effect on the final sale price, for all sorts of reasons which it would be injudicious to point out!

To me it's screamingly obvious that people in the trade will tend to know each other, and to some extent will try to do each other favours by not competing unnecessarily.

And how on earth would you distinguish between an "agreement not to bid" which is backed up by a collective agreement to invest, and an "agreement not to bid" which is designed to keep a price low for the sake of an individual buyer. Why would one be legal and the other illegal?

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He would be a good friend for a very short time ....

I regularly get into conversation with players who have fallen in love with a violin I had my eye on. So I cast my eye on something else. Is that illegal? Should I bid them up to what I intended to pay when I know they would go much higher than me?

I know people get very exercised by the concept of "dealer rings" but really that's the least of your worries in an auction!

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He would be a good friend for a very short time ....

I regularly get into conversation with players who have fallen in love with a violin I had my eye on. So I cast my eye on something else. Is that illegal? Should I bid them up to what I intended to pay when I know they would go much higher than me?

I know people get very exercised by the concept of "dealer rings" but really that's the least of your worries in an auction!

The question here is whose interests the auction house is supposed to serve. I'd argue the primary fiduciary duty of the auction house to obtain the highest possible hammer price for the seller.

The "English auction" (the traditional open auction process that we all are familiar with) is particularly susceptible to collusive bidding because it's easier for members of bidding cartels to identify & punish defecting members.

Google "collusive bidding" and you'd be very surprised how many academics are working on auction design (and the many real-life instances of collusion that have gone on).

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Since, as I`m sure we agree, the seller has an interest in the highest possible price and the buyer an interest in the lowest possible price, it seems a little strange that only the interest of the seller should be worthy of consideration. The auction house is theoreticaly a neutral agent to both parties (and reieves commission from both) and will serve it`s own interests.

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There are partnerships and there are pools.

A hypothetical partnership might include 4 wholesalers who attend all the auctions in a wide geographical area whenever there are musical instruments offered. They each take turns covering the auctions and everything they buy and sell at public auction is split four ways. It makes it easier to cover everything, and they do not need to worry about bidding against each other. It also gives them more eyes, experience and firepower. From time to time, the group might include another dealer who has particular expertise or the ability to find a home for a particular item. Sometimes the group might consign an appropriate instrument to an ebay dealer to sell. When they buy at a major auction, they decide in advance on which instruments they will be partners, and on which they will buy on their own account. Often they might even have different bidder numbers, one for the partnership and another for themselves individually.

The result is to reduce competition amongst themselves at provincial auctions as well as at major instrument auctions, and reduce the time commitment and expenses required to be at every sale.

Conversely, a hypothetical pool might include several competing (yet cooperative) dealers whose expertise is universally recognized and whose certificates are credible. These dealers might choose to pool their resources (even though they have adequate resources individually) to bid on a particular lot which they all recognize as something much greater than its description. As the only bidders with credible expertise to recognize and certify such an underestimated lot, they are able to easily outbid any competitor-especially if the competitor would have to get a cert from one of them to make an item "authentic". While the lot in question might achieve its true value if the dealers with the expertise were not in a pool, but rather competitively bidding against each other, once they are bidding as one, there is little substantial competition remaining. While there might be others in the room who suspect a lot described as "School of Amati" or "School of Guarneri" with an estimate of $10-$20,000, might be the real thing, only the members of the pool can certify it to the satisfaction of the marketplace. So even though the bid might reach 5-10 times the pre-sale estimate, it is still only 10% of the item's value once it has been authenticated and certified by the members of the pool.

Of course, for lots where the authenticity and provenance are established and there exists a widely diverse group of bidders capable of bidding, a pool is virtually useless. But for lots that go beyond the expertise of the auction's expert to accurately identify, a pool of leading dealers is at a decided advantage.

On another note: For those buyers who do not wish to offend their friends by bidding against them, telephone bidding works really well to provide anonymity.

Jesse

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In all the auctions I attend (generally as a buyer, sometimes as a seller) the seller's interests are protected by a reserve price.

But this is a fascinating subject - what is a "defecting member" of a bidding cartel?

A defecting member is any member who unilaterally breaks, during the auction, whatever prior agreement the cartel came to.

We've already established one of the possible purposes of a bidding cartel (of potential buyers) is to keep the hammer price as low as possible. Suppose a member of this cartel changes his mind during the auction. No beer for you! (minimal punishment)

Incidentally, a reserve price might guarantee a minimum price but it doesn't do much to ensure a high hammer price. In some cases it might be detrimental to a high hammer price because it reduces bidding interest, especially if there are other comparable lots without reserve.

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OK, are we trying to ensure a high hammer price or a low hammer price?

In the London violin sales (Bonhams, Bromptons, Sothebys, Gardiner Houlgate) all items have reserves unless they're low value speculative items - Tarisio, the only other establishment I have had dealings with, has reserves on everything.

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We've already established one of the possible purposes of a bidding cartel (of potential buyers) is to keep the hammer price as low as possible. Suppose a member of this cartel changes his mind during the auction. No beer for you! (minimal punishment)

I can`t consider myself part of a cartel simpy by not bidding against a freind. It`s more a question of ettiquette. The punishment isn`t no beer, it`s beer on your own!

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I can`t consider myself part of a cartel simpy by not bidding against a freind. It`s more a question of ettiquette. The punishment isn`t no beer, it`s beer on your own!

This effect (ettiquette?) is otherwise known as implicit collusion.

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OK, are we trying to ensure a high hammer price or a low hammer price?

In the London violin sales (Bonhams, Bromptons, Sothebys, Gardiner Houlgate) all items have reserves unless they're low value speculative items - Tarisio, the only other establishment I have had dealings with, has reserves on everything.

A cartel can be used either way, to depress or inflate hammer prices, depending on context.

Jacob Saunders linked to an article in the Economist quite some time ago where it was alleged two dealers drove up auction prices of Andy Warhol works to inflate that market. IIRC they sold the same pieces back to each other a few times, and there were some other shady practices on the part of the auction house like hidden reserves.

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