A coming Judaica Auction Catalog: a look in to the psychology of auction buyers

A New York Auction House is set to have their next Judaica Auction this coming week. I just finished going through the catalog, and as usual there are some really nice books which I would not mind owning to say the least. A nice volume of a Bomberg Talmud, or a 1st Edition of Menasseh Ben Israel's Nishmat Adam for example. But what struck me most was the abundance of books offered which are being offered at multiple times their retail value. This phenomenon is in not limited to this auction or auction house, the major auction houses seem to be able to sell pretty much anything, even if the same item can be gotten for a fraction of the price elsewhere.

Here are just a few examples of the many in the current catalog. Item 98 offers The Hagadah of Passover. Edited by David and Tamar de Sola Pool. For Members of the Armed Forces of the United States. Just for a background, 550,000 Jews served in the US Armed forces in WWII. Every soldier was issued one of these Haggadot, they are thus not rare in any way. The asking price currently by competitive booksellers is $40-50. If you prefer to buy at auction, the estimate is $300 - $400.

Take a look at item 68 as well, offerring White, William Charles. Chinese Jews, the classic 3 volume set which you can buy now online for under $200. We sold a set in the store just this week for $120. Auction's asking price? $600 - $900. Item 60 offers He'ach published by Tomchei Temimim in Lubavitch. This is indeed a nice historical item, but any honest dealer will ask for no more than $250 for it, while in the auction the reserve is set at $1,000. There are scores of other items like this throughout the auction as well. After a quick search online, I was able to find items 18, 37, and 38 online for pennies on the dollar as well. What, if so, is the reason behind this? Why would someone pay multiple times the value of something for an item they can get for a few pennies elsewhere?

Brooklyn Museum - A Book Auction at Sotheby's - Thomas Rowlandson

I have found that the psychology behind these purchases are several. Firstly, there is the prestige of buying at auction. I have many a time, viewed collections, where the auction tags are prominently displayed with the item purchased, ensuring that every observer knows where the item was purchased. I have heard many an ignorant collector take pride in buying something at say Sotheby's for example, though he couldn't for the life of him tell you anything about it. To prove this is true, ask any dealer and they can vouch this happens more often than not, when underbidders are offered a second copy of an item they bid on just seconds ago, they invariably turn it down. Nothing has changed in those few interim seconds other than their ability to say they bought it at auction. Not that there is anything wrong with buyers who buy this way, I just think it is an interesting observation. If a buyer is willing to pay for the experience, so be it.

Another factor, unfortunately, is auction houses intentionally preying on clueless customers. If, for example, they know they have an uniformed customer who collects Haggadot and lacks a specific one, they intentionally multiply the price, describe it as "rare" and place it in auction even though otherwise it would be of no interest. Several auction houses have been caught shill bidding against real bidders as well. Often, there may be a dealer involved as well, who may go as far as placing an item in an auction, and then go and convince one of his customers to bid on the item.

A final ingredient in the magic-spell cast by auctions was uncovered by researchers from Princeton. Their experiments asked volunteers to play on-line auctions with different rules. Some of these auctions had rules that encouraged over-bidding (like typical open auctions, which most of us are familiar with from movies), and some had rules that encouraged rational behavior (like the eBay structure). With enough guidance from the auction rules, the bidders didn’t end up paying much more than they originally thought was reasonable – but only if they thought they were bidding against a computer programme. As soon as the volunteers thought they were bidding against other live humans they found it impossible to bid rationally, whatever the auction rules.

This implies that the competitive element of auctions is crucial to provoking our irrational buying behavior. Once we’re involved in an auction we’re not just paying to own the sale item, we’re paying to beat other people who are bidding and prevent them from having it.

So it seems Gore Vidal had human nature, and the psychology of auctions, about right when he said: “It is not enough to succeed. Others must fail.”