quattro Digest, Vol 19, Issue 41

[Unka Bart]

Brett replies to Ingo:

> On May 13, 2005, at 1:38 PM, Ingo Rautenberg wrote:
>
>> I feel better.
>>
>> That makes at least two '84 Urqs that have (apparently) sold for
>> over 10k on
>> Ebay in the last month :-)
>>
>> Maybe Dennis should talk to his Ins. Co again ;-)
>>
>
> I posted about this in March when someone said something about A6 4.2
> values, and ebay was mentioned.  Any economics professor will tell
> you that auctions don't represent market value.  Google for "winner's
> curse", or read: http://slate.msn.com/id/21810/
>
> Basically, if you won the auction, you paid more than anyone else was
> willing to pay- and hence you didn't pay fair market value for the
> item in question.

OK.  I went to the site and read the piece.  There is a fatal flaw in 
Gottlieb's illustrative argument.  He uses three oil firms competing 
for a prospective oil field (MAC: from which to produce the fuel for 
our beloved quattros).  He posits that the bidders will estimate the 
amount of oil to be found and base their bids on those estimates.  One 
firm will estimate optimistically and bid too high, on will bid 
pessimistically and bid too low, and  bid just right.  However, the 
firm that bids too much, in his construct, will "win" the auction and 
he calls this the "winner's curse," paying too much for the product.  
The fatal flaw is that real life is not that way.  These bids are based 
on guesses, also known as estimates.  They are usually not accurate and 
in any given case, all estimates can be either much over the reality, 
or much under.  Sometimes any one of the three might be a big winner, 
or equally, a big loser.  Not surprising coming from any economist. 
(ask an economist how to get out of a 10' deep hole, he says "first, 
assume a ladder...")

And finally, the usual definition of "fair market value" is precisely 
what occurs in an auction:

fair-market value

Part of Speech:  
noun

Definition:  
a selling price for an item or property at which a buyer and seller 
will agree to do business; also written fair market value

Source: Webster's New Millennium™ Dictionary of English, Preview 
Edition (v 0.9.6)
Copyright © 2003-2005 Lexico Publishing Group, LLC

yer kindly ol' Unka Bart