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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Great point Jay, and also, maybe not everyone that would be interested in that same card knew that it was even being auctioned, or that at that particular time they had enough cash to buy it. There could have been another card in the same auction they wanted more and spent the money they had on it instead. Doesn't mean they wouldn't have paid more for the card they passed on. Also, what about some people that would actually go into debt, use a credit card, etc., to buy a particular card. If the AH didn't offer such an option, then you possibly aren't getting all the actual interested customers in on the bidding, and thus it isn't the "true" market value at all that ends up winning.
To really be able to say you're getting a "true" market value for a card being sold at auction, I'd think you need to know that every single person on Earth that might want that particular card, knew about the auction in advance, had easy access to it, and even if they didn't have the actual cash, had access to credit cards, a line of credit, or other debt options to be able to effectively bid what they feel the card is worth. Then, and only then, may you have realized a "true" market value for a card sold through and auction.
Otherwise, think about how market values of things like houses would be if you could only buy them via bidding in an auction, with ready cash.