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Game Theory Applied To Duplicate Lots.

 
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Posted 03/04/2021   08:03 am  Show Profile Bookmark this topic Add rismoney to your friends list Get a Link to this Message
So I collect some relatively rare US errors, usually under 50 total available.
Sometimes multiple errors come up for sale around the same time, even in the same auction.

What I believe is that when 2 come up for sale creates the ideal condition for the seller and a participating dealer.

A dealer who knows there are 2 will bid on the first one. They may even already own the stamp. They will attempt to drive out the collector at perhaps any level up to 60% of cat. This will set the table. They will expose the underbidders, ideally at least 2.

The second auction, something interesting happens. The dealer bids again in the second lot perhaps a click or two behind where they were previously. Maybe they've scared out would-be buyers already and get the 2nd lot cheap. Maybe not and the underbidders enter FOMO. If the dealer wins with underbid on second lot, score! They now control more rare supply and averaged down. If other bidders fight over 2nd lot and cause a bidding war, dealer got cheap lot, and collectors overpays. Dealer can now also sell his wares, based on pricing of 2nd lot.

Varying scenarios
Collector sits out first lot, to see what action there is. It comes in on super cheap side. Stamp sells to a dealer for say 40% cat. Second lot, collector thinks price level has been set, and second lot is then sold at 60%! Dealer couldn't let a lot go to a collector under what he paid a minute ago devaluing his lot.

Another scenario
Bidding war on first lot. Price gets away from everyone, say 70% cat. People then think it's an unfairly priced item and a fear comes into the second lot going for same amount. Dealer paddle bids on 2nd lot, a bid or 2 comes in and backs off. People aren't willing to go to 70% again. 2nd lot sells for big discount to first.

Final scenario:
Dealers bid on lots...but collectors run with both of them. No harm no foul to dealers. There's no upside opportunity for them after a certain price point to buy material. If they already own the error, it helps with new realization price anyway. They up the price in their retail catalog.

Apparently I have been on the losing end of these scenarios fairly consistently in the last year of auctions and thought I figured it out.

I think the only 3 ways to play this are:
1. Wargames approach - Do not play.
2. Buying both lots and trying to beat dealers/house at their own game which will most likely make you a bagholder, since you aren't an auction insider. Pardon the skeptic in me.
3. Overpay and realize you won't get the cheaper of the 2 lots regardless of how you participate.

If anyone is interested in samples where I have seen this, I can hunt them down.
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Posted 03/04/2021   08:25 am  Show Profile Bookmark this reply Add rogdcam to your friends list  Get a Link to this Reply
I don't know how many times I have seen two or more consecutive lots containing the same Scott number stamp, take a US Scott 245 as a random example, create a condition whereas the second of the lots gets more aggressive bidding. I have engaged in that behavior in the past and can explain what drove me. Several bidders have their hearts set on the first stamp and set their "unemotional" limits. The lot opens and the limits are reached by all but obviously the winning bidder. The other bidders are now empty handed and questioning their bid limit judgements. The next lot opens and the horses are off to the races, no limits now. It happens a lot. Obviously dealers should not be prone to the same issue but judging by activity recently, in particular for large lots, I am not so sure. That restraint for singles though should still apply.
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Posted 03/04/2021   09:25 am  Show Profile Bookmark this reply Add gmot to your friends list  Get a Link to this Reply
Well said. FOMO (fear of missing out) is a universal trait, so dealers being human, I'm sure they suffer from it as well :)

Certainly experienced that myself - when you miss out on a nice collection for a desired country it is tempting to relax your bid max for the next good lot for the same country. And since houses typically do lots for the same country together, the sting of the missed out lot will still be fresh.
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Posted 03/04/2021   11:47 am  Show Profile Bookmark this reply Add Rich60 to your friends list  Get a Link to this Reply
Ow my head hurts - got over FOMO years ago after much experience with it. I sleep better at night now.
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Posted 03/04/2021   1:14 pm  Show Profile Bookmark this reply Add wkusau to your friends list  Get a Link to this Reply
I think that you need to be aggressive on the first lot and hope that everyone drops out because they still have a second chance to win the next lot. Then let things go really high because there is now only one chance to get the item. Of course, if there is not a bidding war for the second lot, you can bump it a couple of times to "protect" your investment in the first lot.
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Posted 03/04/2021   1:56 pm  Show Profile Check orstampman's eBay Listings Bookmark this reply Add orstampman to your friends list  Get a Link to this Reply
Interesting and useful scenarios. Problem is, when you try to use statistics on individual cases, you will be often surprised/disappointed, since each case of bidders/items/timing is different. In the long run, if you keep the data, you might see some statistically meaningful/correlating information. So if you are willing to play the long game, you may be more successful.
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Posted 03/04/2021   2:51 pm  Show Profile Bookmark this reply Add mootermutt987 to your friends list  Get a Link to this Reply
I agree that each individual case is different. What happens, happens. Having said that, I HAVE seen odd/different behavior when two of the same item (similar in condition, too, of course) come up in the same auction. On rare/scarce items, I have seen it, too, when sold within a short period of time at different sales. My take? Human psychology is fascinating.
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Posted 03/04/2021   8:24 pm  Show Profile Bookmark this reply Add hoosierboy to your friends list  Get a Link to this Reply
As uncle Jed told cousin Jethro, "child, I think you out thunk yourself?"
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Posted 03/04/2021   8:35 pm  Show Profile Bookmark this reply Add rod222 to your friends list  Get a Link to this Reply

Quote:
I HAVE seen odd/different behavior when two of the same item (similar in condition, too, of course) come up in the same auction.


The exact same thing occurred last week, at Abacus Auctions (Australia)
2 similar catalogues / encyclopaedias were listed, one after another. (Maybe Robson Lowe?)

Second one went for something like $130 more than the first, if memory serves.
commented on, by the auctioneer, "that debunks that theory" or similar...
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Posted 03/04/2021   9:14 pm  Show Profile Bookmark this reply Add mootermutt987 to your friends list  Get a Link to this Reply
I worked for a few auction houses many years ago. Putting the lots in the catalog in order was a job all unto itself. For any given issue, MNH go first, OG stamps next, MNG stamps next, and used stamps last. I don't remember what we did with multiples (I THINK an NH block would go after all the mint stamps, but I could be wrong). We weren't done then, though. If there were multiple lots of, say, MNH stamps, the better ones went first - even if they were both called XF, MNH, Jumbo, we still gave thought to which was better looking. So..... in theory, the earlier lots are better than the later ones, and you SHOULD see realizations decline as one goes through all of a given issue. Of course, not all auction houses do it that way, but I think most do. I worked for 3 and they all did it that way. We would even go so far as to discuss why some later lots realized more than the earlier (and supposedly, better) lots. Sometimes we could see that we had goofed up the order a little, but sometimes we concluded that the second buyer was getting a little desperate.

I've seen a few auction houses that do it the other way around - better stamps of an issue go later. That kind of rankles me, but I get why they are doing it. Bidders probably think the water will flow red with blood on the 2nd (better) lot, so they will try and get what they can early, compromising on quality a bit, thus pumping up the earlier lot a little. Still, I want a whack at the better stamp first.
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