Have PCGS and NGC Reached a Nash Equilibrium?
Typetone
Posts: 1,622 ✭
A Nash equilibruim is roughly a non-cooperative game which reaches an equilbrium where no player can be made better off without negatively impacting another player. For example, suppose you and I are non-cooperative competitors at point A. Suppose at point B you would be better off without impacting me. Then the game would move towards B, proving A is not a Nash equilibrium. Only when we run out of possibilities for improvement are we at a Nash equilibrium. There can be more than one Nash equilibrium. I believe PCGS and NGC may be in such an equilibruim.
Here is my supposed model. Assume that PCGS grades slightly tougher than NGC. Now consider a group of same type, same date coins that PCGS would grade MS65. Of course, some would be low end, some average, and some high end. Now if NGC were to grade the same group, the low end and average ones would also be graded MS65, but the better ones would be graded MS66. Well, what would happen is that the low end and average 65s would stay in PCGS MS65 holders, with the high-end ones going to NGC 66 holders. So, where are the NGC 65s? Of course they are the high-end PCGS 64s which have now migrated to NGC 65s. Under this model, for a given grade, PCGS would have better coins that are priced higher. On the other hand the highest graded pieces would be NGC. This happens because at some point PCGS hit it's max, say MS67 for Lincolns. The best of those get into NGC 68 holders. Seems to me that this is a very good description of the way things look.
Why is this an equilibrium? Because it gives both services a revenue stream and gives collectors and dealers a way to differentiate better coins. PCGS get an assured stream since its gets to slab all the low end and average for its grade coins. NGC gets a assured stream since its gets to slab all the high end per PCGS grade coins (albeit at a higher grade). If PCGS tries to improve its position and loosens its standards, it encroaches on NGC. If NGC tries to improve it position and tightens its standards, it encroaches on PCGS. Right now we may well be at a Nash equilibrium. Without cooperating the firms have reached a solution.
What are the implications of this model for collectors/dealers. First, crossovers will be few and far between. The only NGC coins that will cross to PCGS are a very few high for the grade NGC pieces. Example, high-end NGC 66s might make low end PCGS 66. However, after all these years, most of those coins probably already crossed. Except for newly graded coins or mistakes, don't expect very many crosses. Second, I observe that PCGS upgrades are few and far between. The answer is to go to NGC for upgrades. A high-end PCGS 65 will probably not upgrade to PCGS 66. After all, if PCGS were going to upgrade the coin, they probably would have alreday done so. Instead go to NGC for the upgrade, because a high end PCGS65 could well be an NGC 66. That should improve your position, because it seems like the market prices NGC66s above PCGS65s. So, that is how to collect the premium for buying a high end PCGS coin. But, warning, many high end PCGS pieces are probably already in next up NGC holders, so don't expect it to be easy.
Finally, do not ask PCGS to conform to NGC standards, or visa versa. Seems both services are at equilibruim. They have little incentive to change. Yes, complain about consistency. In fact, it seems like consistency is in both services best interest. But, don't hope both will grade to the same standards. Finally, don't be afraid to buy NGC coins. Just make sure that when you buy an NGC 66 you are thinking about it as a very high end PCGS 65, and price it accordingly.
I tried to write this is a non-judgemental way, describing reality, and not trying to change it. Mike Ditka used to say to play with the hand you are dealt. So, as collectors, we need to understand reality, and how to deal with it.
Greg
Here is my supposed model. Assume that PCGS grades slightly tougher than NGC. Now consider a group of same type, same date coins that PCGS would grade MS65. Of course, some would be low end, some average, and some high end. Now if NGC were to grade the same group, the low end and average ones would also be graded MS65, but the better ones would be graded MS66. Well, what would happen is that the low end and average 65s would stay in PCGS MS65 holders, with the high-end ones going to NGC 66 holders. So, where are the NGC 65s? Of course they are the high-end PCGS 64s which have now migrated to NGC 65s. Under this model, for a given grade, PCGS would have better coins that are priced higher. On the other hand the highest graded pieces would be NGC. This happens because at some point PCGS hit it's max, say MS67 for Lincolns. The best of those get into NGC 68 holders. Seems to me that this is a very good description of the way things look.
Why is this an equilibrium? Because it gives both services a revenue stream and gives collectors and dealers a way to differentiate better coins. PCGS get an assured stream since its gets to slab all the low end and average for its grade coins. NGC gets a assured stream since its gets to slab all the high end per PCGS grade coins (albeit at a higher grade). If PCGS tries to improve its position and loosens its standards, it encroaches on NGC. If NGC tries to improve it position and tightens its standards, it encroaches on PCGS. Right now we may well be at a Nash equilibrium. Without cooperating the firms have reached a solution.
What are the implications of this model for collectors/dealers. First, crossovers will be few and far between. The only NGC coins that will cross to PCGS are a very few high for the grade NGC pieces. Example, high-end NGC 66s might make low end PCGS 66. However, after all these years, most of those coins probably already crossed. Except for newly graded coins or mistakes, don't expect very many crosses. Second, I observe that PCGS upgrades are few and far between. The answer is to go to NGC for upgrades. A high-end PCGS 65 will probably not upgrade to PCGS 66. After all, if PCGS were going to upgrade the coin, they probably would have alreday done so. Instead go to NGC for the upgrade, because a high end PCGS65 could well be an NGC 66. That should improve your position, because it seems like the market prices NGC66s above PCGS65s. So, that is how to collect the premium for buying a high end PCGS coin. But, warning, many high end PCGS pieces are probably already in next up NGC holders, so don't expect it to be easy.
Finally, do not ask PCGS to conform to NGC standards, or visa versa. Seems both services are at equilibruim. They have little incentive to change. Yes, complain about consistency. In fact, it seems like consistency is in both services best interest. But, don't hope both will grade to the same standards. Finally, don't be afraid to buy NGC coins. Just make sure that when you buy an NGC 66 you are thinking about it as a very high end PCGS 65, and price it accordingly.
I tried to write this is a non-judgemental way, describing reality, and not trying to change it. Mike Ditka used to say to play with the hand you are dealt. So, as collectors, we need to understand reality, and how to deal with it.
Greg
0
Comments
Spot on. I find nothing I disagree with, and think the acceptance of market reality and it's implications for the collector is an important paragraph.
and it sets us apart from practitioners and consultants. Gregor
CG
What he is saying is if you want a coin graded to PCGS 66 standards, you'll have to buy a 66 holder. A coin in the upper third of the 65 spectrum would be far more likely to cross to NGC as a 66, since they are willing to make the upgrade, and an NGC 66 is worth substantially more to the submitter than an PCGS 65 in the market. That doesn't mean all PQ PCGS 65 coins will be crossed, or cracked-out and resubmitted to PCGS. The coins that are cracked for upgrade will however go where they'll bring the best return.
and it sets us apart from practitioners and consultants. Gregor
A truly interesting hypothesis. Thank you!
Just to add a little. There will still be some variation in PCGS 65 quality. Low end to upper middle end. It is still worth buying the better ones. However, the ones that PCGS thought were really high end 65s, may well already be in NGC66 holders. So, yes, if you want a better than PCGS 65 coin, but don't wany to pay PCGS 66 prices, consider an NGC66. As D Heath points out there may be some high end PCGS 65s that haven't been submitted to NGC. However, those are not likely to be for sale at PCGS 65 prices. They will either be priced as PQ pieces, with prices comparable to NGC66s or they will not be on the market.
Some dealers have indicated that many PCGS PQ coins are being held off the market, in hopes PCGS will loosen and offer upgrades. Those dealers might want to consider trying for higher NGC grades and getting them back on the market now. If PCGS were actually to loosen and offer higher PCGS grades, these dealers may find that the prices have fallen.
A good example is proof Franklin Halves. I have been told by knowledgeable dealers that PCGS CAM and DCAM standards have loosened. In fact I have noticed much new production in early date (50 -53) CAMs and DCAMs. You might think that dealers are earning a windfall, but not really. Prices have dropped. For example a 53 in 67CAM two years ago was a $2000 to $2,500 coin. Now they are available at $1,000 to $1,500. A 53 in 66DCAM sold for just over $2,000 in the Heritage Long Beach auction. Two years ago, that was a $5,000+ coin. Just a few examples. The markets are pretty efficient.
Greg
between PCGS and NGC. Well Done. You are hereby awarded Bears coveted
"GROWL OF APPROVAL AWARD"" for theoretical excellence. Bear
Camelot
That’s an interesting analysis. If it is correct, then we will find an increasing number of average or low-end coins in slabs, as higher end coins will end up slabbed by another service as a lower-end example of the next higher grade. To what extent this is happening, I don’t know. It probably varies from series to series.
As far as NGC hurting PCGS by tightening their standards, I don’t see how that would happen. If NGC’s standards were made more rigorous, they wouldn’t get as many submissions from people trying to get an upgrade on high-end coins. That would hurt NGC’s business...
Dan
mcinnes@mailclerk.ecok.edu">dmcinnes@mailclerk.ecok.edu
Now with degradation and bad PR the swing could go in the other direction. But desire of the coin and the price paid will always be in the eyes of the beholder. Will it set a trend or a ripple in the curve!
Toned coins in low MS60-64 have proved this regardless of the grading label!
Assume makes an ass out of you and me!! No assumptions, let's try to make the collectors control the market and what it will bare!
NEVER LET HIPPO MOUTH OVERLOAD HUMMINGBIRD BUTT!!!
WORK HARDER!!!!
Millions on WELFARE depend on you!
Math problem for PCGS.
and it sets us apart from practitioners and consultants. Gregor
Looking for Nationals, Large VF to AU type, 1928 Gold, and WWII Emergency notes. Also a few nice Buffalo Nickels and Morgan Dollars.
Monty...
Your premise can only be true, however, if you accept the proposition that NGC does not grade as strictly/gives away higher grades easier than PCGS. I don't necessarily accept that.
Dealers may be trying to sell NGC coins near PCGS prices, but see if they will buy NGC coins near PCGS prices!!
Banknote 1:
Of course some coins will cross at the same grade. The very high end NGC 66s can make it into a PCGS66 holder. However, this number is probably low and should be declining, which is what I think we see. As far as inconsistent standards. I see this as a problem not only for collectors but for the services as well. My guess it is in their interest to try to maintain consistency. After all they are the ones who have to buy back all the coins graded in a loose period, when they no longer meet the standard under a tighter regime. To the extent we had a looser period five years ago, my guess is that both PCGS and NGC loosened keeping a parity. This could have been an example of PCGS trying to move into NGC (or IGC) territory, and out of the Nash equilibrium. It probably didn't work and they scrambled to get back. They are rightly wont to do that again.
Greg
I agree, however collectors don't seem to see as much difference in value as some dealers do.
Here is a summary of Teletrade sales for 1883-CC Morgans for the last 90 days in both holders.
PCGS MS64s - $165
NGC MS65s - $234
PCGS MS65s - $255
I picked a common enough coin to have a large sample group. There were multiple coins in each group, but no ringers. The range of values was pretty tight. Perhaps there are better examples.
There were two 1932-D Washingtons sold on TT in AU58. The PCGS coin did $650. The NGC coin did $625. I don't believe the same parity exists for moderns, but I see much more equality in anything older than 1964 lately.
and it sets us apart from practitioners and consultants. Gregor
Looking for Nationals, Large VF to AU type, 1928 Gold, and WWII Emergency notes. Also a few nice Buffalo Nickels and Morgan Dollars.
Monty...
> My guess it is in their interest to try to maintain consistency.
May be yes and may be not. If yes, why we all talked about grade inflation. I have tracked the standing liberty quarter price for the last 15 years. To me, the price did not change that much (excluding the 1989 run-up period). In late 80's and early 90's, there are not many MS67FH SLQs. Where did they come from? We know some were from famous raw coin collection such as boy town. Some were "made" from old MS66FH holders. Most today's PCGS MS66FH coins (say a common date is in the price range of $1100 to $1350) were in PCGS MS65FH holders. Most today's PCGS MS65 SLQ ($350 to $400) were in PCGS MS64 holders ($250 to $300).
If you compare the same grade number (the grade listed on the holder), yes, the price is dropped. If you play the re-grade, up-grade game, today's price not only stay but could be higher than that in 1991. Who did get the most benefit? The grading services.
> After all they are the ones who have to buy back all the coins graded in a loose period.
Again, the answer is yes and no. For yes, HRH said, PCGS is spending $150K a month (or a quarter) to buy back dogs. For no, why are so many dogs still out there.
That is great testimony to the consistency of the product! I'd be terrified if it was millions a year!
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Not really. You can't ignore the fact that (my guess) 15% of the meaningful coins submitted to PCGS or NGC would get graded differently the next time submitted. You can't ignore the fact that standards are constantly shifting, albeit not as rapidly as many on these boards suggest. You can't ignore the fact that the shifting standards of the two services have not perfectly mirrored each other. How can you possibly expect the services to perpetually and intentionally orbit each others' standards when each has such an erratic path?
On the other hand, I have to agree that it would be stupid for the services to try to grade exactly like each other. In other words, I agree with much of the thread. We just can't live by it.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
I'm really not trying to give you a hard time. Hell, I don't even know who you are!
Anyway, you and I both accept NGC's differences. The market (and especially the sight unseen market) also accepts their differences. But when it comes down to individual coins on a sight seen basis, all of the standards and rules fall apart.
On the other hand, if I had thought the thread's initial premise was to be considered only with respect to sight unseen trading, I very probably would have been much more supportive.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
BTW - You observed,
That is great testimony to the consistency of the product! I'd be terrified if it was millions a year!
I'd say it is also a testament to the degree with which many collectors trust PCGS's opinion, and distrust their own. Many collectors buy certified coins specifically because of their lack of confidence in their grading skills. I'd bet the vast majority of grade review coins are coins that turned ugly in the holder, and dealer submissions.
and it sets us apart from practitioners and consultants. Gregor
I agree completely.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
i would totally agree with this thread100% if it was mentioned as buying coins sight unseen!!!!!!!!!!!!!
i really think that i only want to buy sight seen any only great exceptional eye appealling coins that are true ms66 coins in ms66 ngc holders that would also ms66 at pcgs
and they are out there
*****************i think andy lustig summed it up best when he said**********
But when it comes down to individual coins on a sight seen basis, all of the standards and rules fall apart.
On the other hand, if I had thought the thread's initial premise was to be considered only with respect to sight unseen trading, I very probably would have been much more supportive.
sincerely michael
What is even more amazing is I have an old economics thesis paper espousing the exact same Nash principal back in the 1970's and my professor gave me a C-.
He thought the idea was so ho-hum!!
But getting back to this thread, I agree with michael who agreed with Andy who agreed with .............oh never mind!!!
But there were years in which NGC silver classic 19th century proofs were graded TOUGHER than PCGS back in the late 1980's and early 1990's so now throw THAT into the equation.
Pcgs needs to stick to standards, their standards.
ngc needs to stick to standards, their standards,
But trying to get everyone to agree that ngc and pcgs should agree to the same standards, isn't the same as, trying to get pcgs and ngc to agree that they should adopt similar, or exactly the same, standards. Ain't gonna happen. (imho)
Yea right, right?
well anyway for me the coin game is really screwed up and that IS because of the coin ******* and guess who controls the grading ********....................lol
dont hate the game only the players
sincerely michael
and AS A COLLECTOR if you only buy with discretionary funds anD for fun and enjoyment then you have absolutely nothing to worry about
We have been talking about trying to standardize the pcgs and ngc standards, standards that make up the "individualized" personality of each company. Acquiring an individual market presence is not easy, and not easily given up. Many are asking these two companies to give up their individuality, their market, their marketing niche, for the good of the hobby.
Standardization is best. But, when you stop looking at specific reasons to support the idea of standardization, and see why there has been hesitance, you will see that that hesitance is just a company's adherence to their individual marketing plan.
Pick a number between 1 and 10. Pcgs picks 9. Ngc picks 8, to cover 0 through 8, the bulk of the numbers. But, so far, favor has gone with numbers 9, and 10. In time, logic would dictate that favor will fall towards the bulk (0 through 8), but, it hasn't happened yet.
Looking for Nationals, Large VF to AU type, 1928 Gold, and WWII Emergency notes. Also a few nice Buffalo Nickels and Morgan Dollars.
Monty...
BTW - I'm sure there are also many sellers who will hold the coin off the market waiting for PCGS to loosen.
and it sets us apart from practitioners and consultants. Gregor
The collector must use the game to their own advantage.
Select only coins with that look that grabs you by the throat.
The type of coin with the origonal color, luster and strike that shouts quality,
no matter which holder you choose. I personally feel more comfortable with
PCGS although I have purchased Superb NGC holdered coins. Quality will
always transend the quirks of the trading game.To succeed at collecting,
one must develope the "eye" for denoting those coins of any grade that
have the qualities that stand out among a all other coins.
Camelot
i think your post is quite logical. one thing that comes to my mind is that since what we're talking about is revenue for PCGS/NGC, how do you think the variable as represented by PCGS's turnaround trouble as of late will swing the overall dynamics of the equation??
i also found it peculiar that you chose MS65-66 as your discussion grade. from what i see, that's where the trouble starts with the two services. it seems much easier to climb the grade scale at NGC once at MS65 than it does at PCGS. up to that point, the two flip-flop.
al h.
Check out some of my 1794 Large Cents on www.coingallery.org
Second, We the collectors created the situation by pitting one service against another, at the top of the ratings. Why would either make a move and take a chance at become less than what they are now. It would be finacial suicide.
Last, they are both over rated
WS
<< <i>Over the years, many coins have been upgraded upon review by PCGS. Not a huge percentage, but many in number. This would seem to prove that there are indeed coins that are PQ for the current grade on the holder! >>
or misgraded the first time or looked at by a different set of graders or standards changed.
No two coins are equal.
Beauty is in the eyes of the beholder.
In essence, each dollar of value is a different grade.
The grade, whether numerical or adjectival, is only a method of pricing.
The bottom line to any value, is how well it fits in with the collection, and does the purchaser wish to spend his/her money on that item, or do they feel that it is over priced?
Some more food for thought, perhaps.
I firmly believe in numismatics as the world's greatest hobby, but recognize that this is a luxury and without collectors, we can all spend/melt our collections/inventories.
eBaystore
<< <i>In essence, each dollar of value is a different grade. >>
Bingo!
I was whiling away the time years ago at CVMs table at Central States, and he and another dealer were 'horse-trading' a few insignificant coins to beat the boredom. A collector who browsing overheard their banter and when the deal was done and there was a pause ask the other dealer, "what kind of coins did he buy?" The dealers response was that he "bought value", nothing more, nothing less.
Something one should not soon forget, eh?
Russ, NCNE
Unfortunately that does seem to be the way some of the grading has been heading.
I know a lot of people like the concept the higher the grade the higher the price but it is just not that simple.
We all have seen technical 58's that would bring more $ than some technical 60-64's. In addition look at full band, bell or any other designations where lower technical grades can be worth many multiples of higher tecnical grades without the designation.
If coins were truly GRADED and not PRICED, I think we could achieve more consistency in the grades. Grading should not fluctuate because pricing dictates it, grading should strive for unchanging constants.
Joe.
1) You ask us to
<< <i>Assume that PCGS grades slightly tougher than NGC >>
They do grade slightly tougher than NGC on some coins and they grade much tougher on others. But, they also grade more loosely on many coins. The differences are not nearly as consistent and uniform as you'd have us "assume" for your model.
2) You say
<< <i> ...Now if NGC were to grade the same group, the low end and average ones would also be graded MS65, but the better ones would be graded MS66. Well, what would happen is that the low end and average 65s would stay in PCGS MS65 holders, with the high-end ones going to NGC 66 holders >>
Again, it doesn't necessarily work like that. Some of the low and average PCGS MS65 coins would grade MS65 at NGC, while others would grade MS66 and still others would grade MS64. Ditto if those coins were submitted to PCGS out of their holders. And, the "high end" MS65 PCGS coins could very well end up in NGC MS66 OR NGC MS65 holders, or PCGS MS66 holders.
Also, at least partly because of registry sets, some collectors would rather have a PCGS MS66, for example, over an NGC MS67, so they have no incentive to try to get their coins in a higher grade NGC holder.
3) You said
<< <i>Second, I observe that PCGS upgrades are few and far between. The answer is to go to NGC for upgrades >>
Speaking from my personal experience only, I have had better upgrade results through PCGS than NGC over the past couple of years. Some say that even if NGC grades a bit more loosely than PCGS, they are more consistent in their grading. That is one possible explanation for a lower percentage of upgrades at NGC compared to PCGS.
4) You said
<< <i>They have little incentive to change. Yes, complain about consistency. In fact, it seems like consistency is in both services best interest >>
Many would maintain that inconsistency, not consistency is in their best interest.
Please don't take any of this as a knock on you or PCGS or NGC - we all know that grading is imperfect and at least somewhat subjective and inconsistent. And, as I have said before, even if a small percentage of coins are graded imperfectly each month, that still accounts for thousands of coins each month that are graded too high or too low.
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