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Fred CI understand what a "reserve" is to an auction but I don't quite understand the Auction Houses "guarantee" of selling a piece of art for a minimum price. Isn't the whole idea of an auction to let the market decide the value of what ever is up for bid? Something smells funny here. If I were a shareholder in Sotheby's I'd be appalled and I'd probably demand an inquiry to the business practice of "guaranteeing" a winning bid. If I were a share holder I'd be wondering if the seller and Auction House are up to something that is not on the level. I'd also be wondering how much of the material being sold belonged to the Auction House or if some of the material had partial ownership of people in the Auction House.
Can anyone tell me how the "guarantee" works for the Auction House? Can anyone tell me why an Auction House would be so STUPID as to make this "guarantee"?