Posted by Patrick Weiler on April 16, 1999 at 19:00:30:
In Reply to: Re: estimates as self-fulfilling prophesies? posted by Yon Bard on April 14, 1999 at 12:43:39:
: : Dear Folks,
: : It's probably worth noting that auction house estimates are wrong more than half the time, and are about as likely to be wrong in one direction as in the other. This, despite the fact that the estimated range is typically 25% to 50%.
: : The folks at Sotheby's, Skinner's and Christie's really do know rugs and rug values, but the international-level auction is an unpredictable market. Two determined bidders make for a high price; only one determined bidder doesn't. It's that fine a line.
: : One thing for which the estimates are very useful is in deciding where the reserve is likely to be (generally around 75% of the low estimate). Since many collectors make a list of which pieces they will bid on before the sale begins, the presumed reserve bears on what will and will not make it onto the list.
: : Steve Price
: Steve, while it is true that on average less than 50% of the lots reach the low estimat; still, that doesn't mean that some bidders in the other cases aren't influenced by the estimates. In other words, if all estimates were arbitrarily raised by some percentage, would some pieces fetch more?
: Regards, Yon
The economic term is elasticity of demand. If the price goes up, will we still buy as much?
In the early nineties, there were some very high auction prices, way above estimates. The next season, the estimates were raised. Many fewer rugs were bought. The demand does not follow up when prices go up.
Granted, estimates generally influence prices, but probably as much as the racing odds on a certain horse.