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Re: Super Deluxe values

Subject: Re: Super Deluxe values
by Urulöké on 2011/1/2 9:33:32

The house example is a good one to spend a little more time on, I think.

In your example a homeowner said "I have a million dollar house" and the professor says "show me someone who will pay you a million dollars"...

If I put my house on auction today, for seven days, for the highest bidder, I will get X dollars. If I put my house on the "market" and I am willing to wait for the right buyer, I will get Y dollars.

No-one can tell me what X and Y are specifically, but experts can certainly give me a reasonable range for each of X and Y, and I can guarantee you that Y is higher than X except in ridiculously spurious conditions. This is why people do not sell houses at auction unless there are serious time considerations (bank forclosure, etc.)

The same applies to rare books - if you wait for the right buyer, you will pretty much always realize a higher price than if you have a very time limited auction. The conditions (bidder frenzy) that cause auctions to go above "market price" are pretty much ignorable, from a statistical point of view.

Thus, when considering rare art, rare book collecting, antiques, etc. you will almost always see dealers buying at auction, then pricing the item and eventually finding a buyer (and making a profit). Compare this to the number of times you see a dealer buy something at fixed price (on the open market) and taking it to an auction house to realize a profit.

It is all about finding the right buyer. For an eBay auction, you have seven days to find the two people* who really want your book the most in the whole wide world. That is an incredibly short window of time to make sure your book gets marketed and discovered by all/most of the people who might be interested in it. If you have the patience to wait, you will have much better odds at finding the right buyer and getting a better price.

*As others have already pointed out, the realized price at auction is one bid above what the second-most-desperate person was willing to pay.
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