What is the point of the "Buyer's Premium"?

[Ray Van]

I find it interesting that some people were so quick to run to the defense of auction houses, perceiving some sort of accusation on the part of the OP which in fact wasn't there at all. The OP simply asked a logical question that many of us have asked ourselves, and even posited the rationale for it.

I agree the practice seems to be more on the psychological side than anything. Many will not factor the buyer's premium into the price we pay, then accept it if we are the high bidder. Doesn't make it ideal, but we accept it. And since most auction houses charge it, no one is going to drop it. Plus they make more money that way.

Hypothetically asking "how would AH's make money otherwise" is missing the point. Most charge consignment fees so they already make money there. They could up the consignment fees to offset dropping the buyer's premium but that would be bad for business.

I see a parallel to Las Vegas hotels charging an additional $50 a night in "resort fees" (on top of the room rate) for use of wifi and the gym that nobody uses - smart shoppers include this in the cost of a night's stay, while others that didn't check the fine print are upset at the extra charges upon checkout.

It is what it is. An established business practice designed the make the business more money, simple as that.

I also appreciate eBay's policy of not charging a BP (but if I was made CEO tomorrow you can bet I'd implement it and watch the stock price rise).

[Peter_Spaeth]

Originally Posted by Ray Van

I find it interesting that some people were so quick to run to the defense of auction houses, perceiving some sort of accusation on the part of the OP which in fact wasn't there at all. The OP simply asked a logical question that many of us have asked ourselves, and even posited the rationale for it.

I agree the practice seems to be more on the psychological side than anything. Many will not factor the buyer's premium into the price we pay, then accept it if we are the high bidder. Doesn't make it ideal, but we accept it. And since most auction houses charge it, no one is going to drop it. Plus they make more money that way.

Hypothetically asking "how would AH's make money otherwise" is missing the point. Most charge consignment fees so they already make money there. They could up the consignment fees to offset dropping the buyer's premium but that would be bad for business.

I see a parallel to Las Vegas hotels charging an additional $50 a night in "resort fees" (on top of the room rate) for use of wifi and the gym that nobody uses - smart shoppers include this in the cost of a night's stay, while others that didn't check the fine print are upset at the extra charges upon checkout.

It is what it is. An established business practice designed the make the business more money, simple as that.

I also appreciate eBay's policy of not charging a BP (but if I was made CEO tomorrow you can bet I'd implement it and watch the stock price rise).

The OP called it a psychological trick by AHs hoping to get more from an ignorant buyer. That's not an accusation?

[Leon]

Originally Posted by Peter_Spaeth

The OP called it a psychological trick by AHs hoping to get more from an ignorant buyer. That's not an accusation?

“It depends on what the meaning of the word ‘is’ is."

And the buyers premium is to pay the AH for their services.
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[Pat R]

Originally Posted by Peter_Spaeth

The OP called it a psychological trick by AHs hoping to get more from an ignorant buyer. That's not an accusation?

I think this explains why a lot of people have a problem with the BP or at least those that are surprised when it's added on their invoice.