Auction Strategy

nags · November 27, 2013 7:28AM

Let's say three coins are set to be auctioned in the same event. The three coins are virtually identical 1933 Saints. For the purpose of this question consider them equal in all regards. The three coins are sold back to back to back. You plan on purchasing one and want to get the best price. There are 20+ qualified bidders that are serious about purchasing one of the coins.

Which coin is it smart to buy?

I ask because I just had this situation happen with another collectible. My thought is that you get the best price on the first one.

MGLICKER · November 27, 2013 7:30AM

Buy the one that TDN doesn't like.

illini420 · November 27, 2013 7:36AM

In my experience, the first one is usually the one that ends up the lowest priced. Many bidders will be unwilling to pay up for the first one knowing they have a few more chances for the next ones that are substantially similar. But that first sale also sort of establishes the floor as the first winner was willing to pay that much or more, and the underbidder was right there with them.

A clear example of this happens every year at my coin club. We do a brown bag auction of 15 coins. 15 different coins sealed in brown paper bags. Some bags have coins worth around $20-$25 (an ounce of silver) and some bags have small gold in them worth over $100. Before the bags are opened they are effectively all exactly the same as they all have the same expected value. We auction them off one at a time and no one opens any until all are sold. In the past few years, the first one sold is always the cheapest and the last couple bags always go for much more as those who haven't won any yet compete against one another to get one.

CoinRaritiesOnline · November 27, 2013 7:39AM

No way to know.

I have seen similar scenarios where the first coin was the cheapest, and others in which the first coin was the most expensive by a lot.

RYK · November 27, 2013 7:41AM

There is probably a "game theory" solution to the problem. Any Nash-inspired economists around?

illini420 · November 27, 2013 7:47AM

Another factor to consider is whether the first buyer can afford to buy all of the examples in the sale and is willing to do so. If that is the case, and that buyer wins the first one at X, you can probably expect them to bid at least X (if not more depending on what their real max bid is) on all of the remaining lots too. So unless that first buyer is also the winner of the later lots, expect the later lots to sell for more than the first.

sparky64 · November 27, 2013 7:48AM

In my experience I've learned that the first, almost, always goes the cheapest.

I'm sure you'll have a limit set therefore you won't get caught overpaying regardless.

acloco · November 27, 2013 8:15AM

It has been my experience, that the auction can go either way. 1st can be most....or 2nd...or 3rd.

Really depends on the bidders - who lost out or won on the first.

This past Saturday, I wanted 1, 2, 3, 4, 5, & 10 oz poured silver sell for - $33 per oz, 33 per oz, 35 per oz, 33 per oz, 32.50 per oz, and 24 per oz for the 10 oz.

So...........

In my opinion, regardless of what is being auctioned, set the highest amount you are willing to pay....and stick to it. Period. DON'T get caught up in the hype. Don't "talk yourself into" the item....."well, it is only a few dollars more"....or only 3% more. Do your research. Know how much and where you can buy the exact same item at the time the last bid is hammered.

Personally, I stay in the bidding on all of the lots and stop at or one over my set max bid. Let the other buyers pay the big money. Can you guess which silver I bought in the example above?? In that instance, people were paying 33, 66, 105, 132, 162.50, and 240. They were not doing the math very well, with silver at $20 per oz. Yes, there is a slight premium for poured silver....but NOT $13 to $15 PER OUNCE!!!

Also of note, I had a list of 60 coins out of the 450 lots listed at the auction. I knew what grade the raw coins were and what I was willing to pay for them. I definitely had a list of 3 KEY coins that I WOULD buy, again, at my limit...or a touch over (these were for a couple collections I am working on personally). Of note, these were key or semi key date coins - 1877 IHC in G, 1908 S IHC in VF/XF, & 1909 S IHC in a solid XF. I ran them all up to my max, and gracefully bowed out. On the 1909 S IHC, with $100 of my max bid, I told the dealer that was the other primary bidder, that his vehicle was being towed.

The entire room had a great chuckle. We talked quite a bit afterwards...he got a great coin at a fair price....and his vehicle did not get towed.

WTCG · November 27, 2013 8:17AM

There is no way to know but experience has taught me the last lot is usually never the cheapest.

Coinosaurus · November 27, 2013 9:32AM

<< There is probably a "game theory" solution to the problem. Any Nash-inspired economists around? >>

This reminds me of the calculus of marriage. An average person has seven opportunities. What is the best strategy? IIRC the math says always pass on the first two then take the first one that is better or equal than the first two.

I always thought it was dumb to reduce such a problem to calculus, but you know those nerdy mathematicians. For themselves personally the exercise was entirely theoretical to begin with.

SmEagle1795 · November 27, 2013 9:40AM

I've run into this four times recently and it applies not only to one auction but also to sequentially timed auctions with a nearly identical coin in them.

Buy the middle coin.

They will be compared to death and auction houses tend to put the slightly nicer coin first (especially in Ancients, probably not quite as much in US). The first coin sets the base price, knowing what someone will pay for it. The top bidder will probably not want two identical coins and the underbidder wasn't willing to go higher on the first coin, so they will probably get the second for a cut bid or a full bid under the first coin's price. The last coin is the final opportunity to get one during this auction which could be the last time you'll have an opportunity for several months and you begin to justify it to yourself that it's worth the higher bid. Often you'll have people waiting in the wings, seeing that two coins just sold, knowing there is another underbidder out there, and they'll bid over, having a better understanding of what the market price is now that the first two have sold, leading to more confidence for someone else to jump in and fight a bit over the last example.

However, my take is: if there are three identical coins in an auction, skip all of them unless there really are only three known.

roadrunner · November 27, 2013 9:43AM

The 3 coins can never be "virtually" identical in quality, even if graded the same. One might have spots, one might have hits, one might have rub. Maybe only 1 is CACable and could plus on resubmit. If it's the first coin, it could easily bring the most money as quality oriented buyers will want the best coin available. And if there are reserves set, who even knows if 1, 2, or all 3 actually sell? While Saints are probably some of the simplest coins to grade where most have a uniform look, there are still enough differences that even 63's will have major differences. The same discussion could be about 3 MS63 1794 dollars. No way they would be the "same."

sparky64 · November 27, 2013 9:52AM

<< I ask because I just had this situation happen with another collectible >>

How did your situation turn out?

nags · November 27, 2013 10:09AM

interesting replies. I like the calculus thought, that actually makes a lot of logical sense.

In my situation each sold for a progressively higher price.

sparky64 · November 27, 2013 10:12AM

<< In my situation each sold for a progressively higher price. >>

Told ya.

Happens to me too. 90% I'd guess.

kranky · November 27, 2013 10:49AM

So if in general the first goes the cheapest, how do you deal with that as a consignor? "If any other coins of the same date, mint and grade are in the same auction, I request my coin be auctioned last in that group" ?

Unknown · November 27, 2013 10:53AM

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yellowkid · November 27, 2013 11:09AM

It all depends on who is bidding.

coinkat · November 27, 2013 8:57PM

Auction strategy has really not surfaced as a topic too often here- It is worthy of discussion. I really don't know which will bring the most $. Perception, pictures or who is in the room are critical factors depending on the auction venue/format.

I enjoy auctions and strategy is important- perhaps the bidding strategy is something we all do not contemplate often enough

ricko · November 27, 2013 11:21PM

The psychology of auctions is very strange, and much more influential than any applied mathematics. I have watched/participated in many, many auctions of different products (coins, firearms, furniture etc.) and I find the human element to be most influential. So much depends on the crowd makeup at an auction. Cheers, RickO

joebb21 · November 28, 2013 12:52AM

<< So if in general the first goes the cheapest, how do you deal with that as a consignor? "If any other coins of the same date, mint and grade are in the same auction, I request my coin be auctioned last in that group" ? >>

I know of situations where consigners have made demands that no other of the same coin could be in the same auction so that there is no comparison made and his gets the sole attention. Granted these were some "big coins" anyway...

CoinRaritiesOnline · November 28, 2013 1:12AM

<< So if in general the first goes the cheapest, how do you deal with that as a consignor? >>

I reject the notion that "in general the first goes the cheapest". So I wouldn't deal with it at all.

Shamika · November 28, 2013 1:25AM

I think a key point here is that there are so many bidders (20+).

I believe only a few bidders will aggressively pursue the first coin all the while knowing they have two more chances after the hammer falls. As a result, I'd go all out after the first one. The remaining bidders will sit back wanting to see where pricing goes on the first coin before deciding what to bid on the remaining two pieces. After the first piece sells, the remaining 19 bidders will bid more aggressively and will find themselves in a dog fight.

CoinRaritiesOnline · November 28, 2013 1:54AM

Here is a concrete example I sat through some years back. Admittedly this is a different scenario than the OP's, but illustrative nonetheless.

This was the Ford sale of French Colonial gold coins from the Le Chameau shipwreck. There were roughly 100 specimens, a variety of dates and mints, many duplicates and a mix of quality.

Here is a page showing the very first lot selling for a price that was identifiable as bizarrely high as soon as the next few sold.

Shamika · November 28, 2013 12:10PM

<< Here is a page showing the very first lot selling for a price that was identifiable as bizarrely high as soon as the next few sold. >>

The first coin appears to have been minted with a different die set. Could this be the reason for the high price?

rec78 · November 28, 2013 12:33PM

<< In my experience I've learned that the first, almost, always goes the cheapest.

I'm sure you'll have a limit set therefore you won't get caught overpaying regardless. >>

CoinRaritiesOnline · November 28, 2013 12:53PM

<< 

<< Here is a page showing the very first lot selling for a price that was identifiable as bizarrely high as soon as the next few sold. >>

The first coin appears to have been minted with a different die set. Could this be the reason for the high price? >>

I strongly doubt it - these seemed to be selling as type coins as evidenced by the fact that many described by the cataloger as rare dates and mints did not bring any appreciable premium.

My best guess is two bidders had no idea what these were going to bring and chased this first one up. After it sold, there was no support at that level until some significantly nicer ones sold later in the auction.

pocketpiececommems · November 28, 2013 1:14PM

Are the three going to be auctioned off as "choice" or one at a time. I've seen many auctions of choice where the winner took all three. I've seen a choice vehicle auction of 8 where the winner took 7 and the last one then brought more per than the seven.

derryb · November 28, 2013 2:03PM

buy all three, corner the market.

beryl · November 28, 2013 4:16PM

This happens with currency not infrequently.
Sometimes the first is the most expensive especially if there are only a small number of bidders for a relatively uncommon item.:
17903

17902

magikbilly · November 28, 2013 6:34PM

If there were three candid XXXXXXXXXXX of XXXXXXX XXXXXXA XX XXX XXXX XX XXXXXXXXX ending at about the same time, which there certainly are for me, I bid my absolute maximum on all three. They are not equal despite appearances, and I can use each differently. Maybe resell one. If I win them all I wanted them all, and I can always sell something if need be in the short run. One could be a book cover and one an interior detail.

Eric

CoinRaritiesOnline · November 28, 2013 11:00PM

<< This happens with currency not infrequently.
Sometimes the first is the most expensive especially if there are only a small number of bidders for a relatively uncommon item.:
17903

17902 >>

Yep. You just never know.

TwoSides2aCoin · November 28, 2013 11:07PM

My plans more often fail. So be certain, and put your best shot out there. If it's not good enough, at least you did not fail to plan….
In short: The ONE you want is the only one you should plan to get at whatever the cost. That would be my only strategy. Nuclear bid the SOB …. 3 times, if necessary.

ColonelJessup · November 29, 2013 2:51AM

<< There is probably a "game theory" solution to the problem. Any Nash-inspired economists around? >>

Sorry, but Von Neumann told me to stay away from random walks and anything else requiring the use of discontinuous equations.

droopyd · November 29, 2013 9:10AM

<< I always thought it was dumb to reduce such a problem to calculus, but you know those nerdy mathematicians. For themselves personally the exercise was entirely theoretical to begin with. >>

Don't be so sure about that, sport. In my experience, the hot chicks date the jocks but marry the nerds.

Walkerfan · November 29, 2013 9:28AM

Bid hardest on the one you like the MOST whether it be first or last. If it's first and you lose then maybe you can get a good deal on the second or third coin. There will ALWAYS be one that is the favorite (no matter how small the difference in quality) regardless of the same grades.

Auction Strategy

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