Quote:
Originally Posted by oldjudge
Do auctions really establish a "market"? Take an example--on a scarce card buyer A is willing to pay up to $10,000 for it. The next best buyer, buyer B, is only willing to pay $6,000 for it. If it goes to auction it will sell for one increment over $6000, say $6250. If sold privately it will sell for $10,000. Now, what's the "market" for the card? I think this illustrates the problem with auctioning off scarce items--the fact that the price is set by the second most aggressive bidder, not the most aggressive bidder.
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The counter argument here is that someone might not be willing to pay an aggressively high price for something they want if there are no public sales in that range for fears of overshooting by potentially thousands. In an auction, (theoretically and shilling aside) you can be confident that no matter what you spend, someone else is willing to buy it at one bid less.