Many conclude that supply and demand determine value. Auctioneers are to endevor to maximize demand with a given supply to maximize prices. We ask today if the supply is given?
Say an auctioneer puts up for auction 100 western saddles dating from the 1950s to the 1970s. For an online auction, bidding takes place and possibly even the auction concludes (or the live auction takes place and concludes) when 100 more western saddles are put up.
A bidder — of course — cries fowl in that “If I had known you had 100 more, I would have adjusted my bidding …” In other words, with 200 such saddles, there is more supply and possibly the same demand, thus lowering market value.
As such, a seller/auctioneer might be incentivized to keep secret there are 100 more saddles so that the first auction shows supply and demand in a more seller-favorable environment. Auctioneers I know would say, “We don’t want to flood the market … and we want to help our seller as much as we can.”
This is an interesting conflict of views. Auction bidders/buyers want to assess supply in order to gauge their bids and sellers largely do not want bidder/buyers to be cognizant of true supply so they don’t gauge their bidding accordingly.
Who doesn’t remember that western movie years ago when the snake-oil salesman rode in to sell his bottles of brew? He stood on the end of the wagon, proclaiming to a crowd the virtues of his “one bottle” of medicine. As soon as one person said, “I’ll take it …” he suddenly had more under a blanket behind him.
In other words, he would portray a supply of one and demand of 30 interested citizens in order to set price, then increase the supply at that same price. Could that purchaser be disappointed there were more bottles? Sure, but is there a crime here?
I would suggest this boils down to perception versus reality and could backfire on an auctioneer/seller. What if every auction for six months portrays 100 saddles, then suddenly produces 100 more after some are sold? Would bidders/buyers come to expect such? What if the next auction only had a total of 100 and no more forthcoming?
It’s likely bidders and buyers would adjust their bidding assuming there would be further saddles coming up later, and not bid as much in the “first 100” saddle auction, thus actually injuring the seller/auctioneer. Of course, the auctioneer could announce, “This is the last 100 saddles we’ll have …” if that were true.
Which brings us back to our point of this story. If a seller/auctioneer says, “Our total inventory is 100 saddles — no more forthcoming.” and then later discloses that there are indeed 100 more which were on hand prior to this announcement, that’s clearly intentional misrepresentation.
However, if a seller/auctioneer says “Here’s 100 saddles” without proclaiming anything about the total number of saddles in inventory, a bidder/buyer has a difficult if not impossible claim. Further, the Internet can help a bidder/buyer gauge supply and demand otherwise.
Mike Brandly, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, RES Auction Services and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, an Instructor at the National Auctioneers Association’s Designation Academy and America’s Auction Academy. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by the The Supreme Court of Ohio for attorney education.