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    • john

      Read the rules at the top of this page before posting.   12/30/16

      The rules are copied here for your convenience: The Auction Scroll is for sharing opinions on instruments listed and offered for sale online on this site or any other. It is for the civil exchange of ideas and opinions about the instruments themselves. The opinions expressed are solely those of the poster, and do not represent the opinion of Maestronet or its forum moderators. Personal attacks on individuals will not be tolerated and will result in banning from participation in the forums. For example you are free to state that in your opinion a certain instrument labelled such and such is or is not authentic. You can also support your opinion with facts as you see them, as long as you make no reference to the individual or company listing the instrument or use hearsay in your argument. You cannot say for example that such and such an instrument is not authentic because you know the individual listing the instrument is not trustworthy or you believe the company routinely uses false descriptions of its instruments. That will get you banned. Similarly, you can defend the authenticity of an instrument with the facts as you see them, as long as personal attacks and hearsay are not used. For example, you could refer to the shape of the f holes in support of a certain origin, but what you cannot do is attack any individuals that may hold a different opinion. This is a unique forum, so please abide by these rules to ensure it continues in its current form.
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Brad H

Auction Houses and Online Bidding

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8 hours ago, jacobsaunders said:

Since I'm sure you are probably right, it does leave one wondering why, and with what justification they all charge the buyer a 20%ish “Buyers Premium”

Probably because they could not get away with charging sellers a 40% Seller's Premium. :D

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9 minutes ago, GeorgeH said:

Probably because they could not get away with charging sellers a 40% Seller's Premium. :D

;):P

In the end it's all taken from the consignor's share of the whole cake, isn't it?

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Yes, in that the actual sale price of an item that reaches £10k on the hammer is £12k. Of that sale price of £12k the seller gets £8.5k ...

So the "buyer's premium" is a clever piece of sophistry, particularly if the auction house is also the owner.

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59 minutes ago, martin swan said:

You can't act for the consignor and the buyer simultaneously unless you are prepared to set a fair sale price and to stand by that price through some form of guarantee.

Point taken.  However, I suppose the auction estimate is an attempt at fairness to both parties.  The better houses have better specialists and fairer estimates?

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What is a "fair estimate"?

The estimate and the reserve are determined by the level of trust between the consignor and the auction house. An auction house will always try to get the thing catalogued at an estimate which seems low.

The lower the estimate, the more likely the thing is to get a high price, since two people with specialist knowledge will think they have spotted a bargain and then battle for the thing way past what it's worth.

If the estimate appears not to be "a bargain", no-one will bid and the item won't sell.

It's tempting to think that auctions are governed by reason on all sides, but I think game theory comes closest to explaining how they function.

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18 minutes ago, Brad H said:

Point taken.  However, I suppose the auction estimate is an attempt at fairness to both parties.  The better houses have better specialists and fairer estimates?

Nothing beats using your own expert judgement. 

There are times when auctioneers or any agent selling something can be pressured into a high valuation and times when they have seen a violin in the final moments before a deadline and just go with what the owner will suggest. 

caveat emptor either way! 

As policy, Christie’s over the collectibles division used to try to get the high estimate at 60% of the anticipated hammer price on the argument that it would instil excitement in the room, and raise the potential winning bid. In reality with an 85% reserve against the low end of the estimate it meant that you could avoid a problem: A violin that should hammer at £10 would estimate at £4-6, and reserve at £3.5. 

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Just now, Ben Hebbert said:

Nothing beats using your own expert judgement. 

 

 

I agree - best to ignore the estimate completely and just decide what you are willing to pay. Paying attention to other bidders is also a certain recipe for disaster.

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17 minutes ago, martin swan said:

best to ignore the estimate completely and just decide what you are willing to pay.

Unfortunately, this is psychologically impossible due to "anchoring," and it is why the first person to "anchor" a number in a negotiation has an advantage. "Anchoring" is a very powerful cognitive bias, and studies have demonstrated that people behave relative to an anchor value even when they are aware of it and deliberately try not to.

So, ideally, it would be advantageous for auction houses to anchor a high valuation and start bidding low. However, I think that too often they do the opposite!

Quote

"Anchoring or focalism is a cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered (the "anchor") when making decisions. During decision making, anchoring occurs when individuals use an initial piece of information to make subsequent judgments. Once an anchor is set, other judgments are made by adjusting away from that anchor, and there is a bias toward interpreting other information around the anchor. For example, the initial price offered for a used car sets the standard for the rest of the negotiations, so that prices lower than the initial price seem more reasonable even if they are still higher than what the car is really worth.[1]"

https://en.wikipedia.org/wiki/Anchoring

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This is relevant to fixed price sales, but not so much to auctions, where people are competing with other people for "bargains" in a single opportunity sale.

I don't think you can apply concepts from negociation strategy (business negociation or hostage negociation!).

But it's all very interesting stuff. 

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13 minutes ago, martin swan said:

I don't think you can apply concepts from negociation strategy

Well, bidding is absolutely a form of negotiation because you are negotiating a price in competition with other buyers. Where the price ultimately ends up has a lot to do with buyers' psychology, and if they feel they are coming out ahead or not. So the House Estimate serves as an anchor for that judgement. The closer you are to the lower estimate the more of a "bargain" you feel you are getting.

Something else that is interesting about anchors: Even numbers that are irrelevant to a negotiation can effect the outcome if they are heard prior to the negotiation. Studies have shown that people shown a large number prior to a negotiation tend to agree on a higher price than people shown a smaller number before a negotiation, even before they know what the negotiation is going to be about.

Number anchoring is subconscious and very very powerful. 

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7 hours ago, jacobsaunders said:

My point was more a philosophical one: Should we accept Martins thesis, that the auctioneer is exclusively working for the benefit of the consignor, it would seem strange, what business he/she/it has charging the buyer 20%(varies) commission. Since the act of charging a substantial sum suggests a contractual relationship, one should be able to expect some sort of service in return. In my side job as court expert, I have noticed that liability cannot be easily evaded. It, of course, makes a difference if an auctioneer advertises a violin as e.g. “A violin, estimate 10 quid” or if he advertises it as, e.g. a violin, Italy, 18th. C. Family of whatever”.

 

I would dispute the thought of Ebay in this discussion, since buying something quasi unseen from an anonymous (often) scoundrel in a foreign country hardly seems to justify the title “law of the jungle”.

It's a jungle with amazingly strict, and increasingly well enforced, rules protecting both buyers and sellers, in addition to a culture of communication, tolerance and tact ("being a good eBayer") not dissimilar to the conditions of discourse encouraged on MN.  Part of that culture is to encourage buyers to accurately rate and review products and sellers, as well as to write detailed guides to buying specific types of merchandise.  The fees charged sellers are low, and buyers pay no fees.  When disputes over a sale occur, a well-mapped-out resolution process exists, and there's an institutional bias in favor of fully or partially refunding a buyer's money (most frequently without return of goods) in cases where the buyer has done what's required by the process.   EBay and Paypal, while now separate entities for some years, co-operate to enforce the rules and discipline sellers through sequestration of funds. The supposed anonymity is also much less than is often assumed.

My personal experiences buying on eBay have been overwhelmingly positive.  It's an excellent venue for a knowledgeable buyer to purchase specialist merchandise on, and opens certain foreign markets (Japan and China in particular, but also many other places, such as the Greek islands, Nepal, etc.) with hard to find local products to the Western buyer.  OTOH, it's also a great place for the public at large to get standardized consumer goods at a discount, and a remarkable market for books and decorative items. :)

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Just now, GeorgeH said:

Well, bidding is absolutely a form of negotiation because you are negotiating a price in competition with other buyers. Where the price ultimately ends up has a lot to do with buyers' psychology, and if they feel they are coming out ahead or not. So the House Estimate serves as an anchor for that judgement. The closer you are to the lower estimate the more of a "bargain" you feel you are getting.

Something else that is interesting about anchors: Even numbers that are irrelevant to a negotiation can effect the outcome if they are heard prior to the negotiation. Studies have shown that people shown a large number prior to a negotiation tend to agree on a higher price than people shown a smaller number before a negotiation, even before they know what the negotiation is going to be about.

Number anchoring is subconscious and very very powerful. 

Yes I agree with all of this, but in an auction scenario it all goes out the window. You have to strategize in relation to every item.

If something is a highly valuable and highly prized item with an uncontentious attribution, the lower the estimate the higher it will go.

If something is a bit crap, anchoring a higher number will get the best price.

 

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I think there is too much of an assumption that buyers go to auctions only with the motivation of getting a "deal" or "bargain". Many buyers know what they want, know what they are willing to pay, and go to auctions because that's were a particular item pops up. 

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36 minutes ago, deans said:

I think there is too much of an assumption that buyers go to auctions only with the motivation of getting a "deal" or "bargain". Many buyers know what they want, know what they are willing to pay, and go to auctions because that's were a particular item pops up. 

That's true - I would say I'm in that category - but it seems to me the price is set increasingly by musicians hoping to pay slightly (or significantly) less than retail.

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1 hour ago, martin swan said:

If something is a highly valuable and highly prized item with an uncontentious attribution, the lower the estimate the higher it will go.

I don't know whether this is a fair extrapolation of your point but, long ago,  in a far away....Ebay at one time had a fee policy which penalized those with high starting bids - the fee increased as the starting prices increased.    If I remember correctly, there was also a higher fee for high reserves.  Back then, most sellers started their listings with $9.99 opening bids, even for items valuing in the thousands.  What happened?  Ebay was actually an auction site back then -  Lots of bidding which led to people becoming invested in the bidding (gaming strategy per Martin), and most sellers were happy with the final price.

That changed some years ago and Ebay axed the fee schedule pro-rated on the opening price and reserve.   What happened?    Ebay became a store/auction site with many items listed with ridiculous Buy It Nows or opening prices.  Most items do not sell and you see the same item listed for years on end.   Sellers might be happily surprised by the amount of interest and the sale price should they forego their high starting prices and host an item with a low opening bid.

I have bought hundreds of violins on Ebay with mostly positive results.  When looking at a listing, one of the first things I do is try to get a sense as to the motivation of the seller - why is he/she listing this item?  If they appear to be knowledgeable sellers, are they dumping an instrument with "issues", or is the sale a normal part of their business plan?  If the sellers are not knowledgeable and "are selling their grandfather's fiddle", then there is a higher chance that the violin is fresh to the market (hasn't yet been picked over by the pros).

Of course, this strategy does not apply to an auction house instrument - its history just prior to the sale and the motivation of the seller are unknown (at least, to me).  This is less of a concern to those who can attend the viewings and handle the instruments - they can see the good and the bad and form their opinions as to the value they place on the instrument.  I guess I am back to Dean's comment that due diligence is critical for online bidders and, even then, we will always be at a disadvantage.

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Whether it is automobiles, violins, horses or Barbie dolls, auctions are at best a crap shoot.  Unless you are looking for one specific item -- say a 1959 Les Paul Standard with a flame top and have the jingle in your pocket -- you can usually satisfy your needs either locally or through an advertisement in places such as craigslist.

I think the lure of an auction is getting "the deal."  But to do that, you need to be more than an "expert," you must be extremely knowledgeable about the particular field.  Having said that, there is definitely excitement and a bit of fun in participating.  But if you are going to do so online, be prepared for collateral damage to your wallet and your ego when you find out your 19th Century bargain was made by some fellow in Cleveland Ohio in 1957.

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At the risk of criticism for blowing blowing my own trumpet!

This is relevant. I run an auction where I am acting for the seller, but the seller is my self, so my incentive to encourage repeat business is perhaps greater than conventional auctions. I also have the advantage of the ability to give credit to customers on the very rare occasions when they might not be happy and wish to return goods for exchange. As for photos, it is entirely possible to show multiple images for online auction lots. See here;  https://www.amberviolins.com/catalogue/  

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