Quote:
Originally Posted by Exhibitman
Excerpt from one of my recent columns:
"There is a substantial social science devoted to understanding how bidders behave, which you can find online readily. It all gets rather complicated and prolix. I boil it down to asking why are auction rules set up the way they are?. ... Why would the auctioneer add a buyer’s premium to the hammer price rather than just selling for the hammer and deducting a commission from it? ... because people don’t think to add the buyer’s premium to the bid in the heat of an auction. Many cannot. It all has to do with how we react to stressful environments. Homo sapiens is not a nice guy; he didn’t get to be the apex predator on this planet by being laid back. We are hard-wired to focus intently and compete with absolute concentration, to the exclusion of other things, when it matters. That last bit is called tunnel vision, and if you ever got into a ring to fight, you know exactly how it feels when the world around you goes fuzzy and slows down and all you see is the guy trying to smack you in the nose. ... The auction format produces stress that taps that primal beast, floods us with the same fight or flight hormones in the heat of the moment, and impairs our rational minds, the place where we do math, so we overbid to achieve the kill, the win. And when we win, we have the same burst of endorphins we experience when we prevail in a fight or conquer an obstacle. Followed shortly afterwards by that “oh f**k” moment when the high dissipates, the math mind turns back on, and we add 35% (buyer’s premium, shipping, and sales tax) to the hammer price and realize that we just set a record price on that card."
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While I don't dispute that, the reason buyer's premium was started was competition for consignments between Sotheby's and Christie's mainly in the Art realm. Basically they used the "hey we're only charging "x" commission" line, and glossed over (if mentioning at all) this newfangled Buyer's Premium.
Buyers not paying attention, getting caught up in the heat of the moment, etc. was an unlooked-for side bonus as hard as that may be to believe.