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The Bid-Pooling Myth

  [FYI -- no endorsement implied.  m.e.e.]
  	In today's edition of the _Journal of Commerce_ (July 19, 1997), 
  Catherine Heilman, a summer fellow of the Ludwig von Mises Institute and 
  an arts and economics major at Wellesley College, argues that a sweeping 
  antitrust investigation of the auction industry is based on a poor 
  understanding of the economics of auctions. 
  	The Department of Justice has subpoenaed records from dozens of dealers 
  and auction houses, including Christie's and Sotheby's, to find evidence 
  of price fixing on premium and bid pooling by buyers. In particular, 
  Justice is seeking evidence of buyers "rings," pools of bidders who agree 
  not to outbid each other only to hold a later auction among themselves to 
  divide up profits. 
  	But in today's highly competitive and globalized markets, where 
  anonymous bidding is common, price rings are virtually impossible to 
  sustain. Members face every incentive to defect. Even successful rings 
  face imposed  reserve prices, and competition with other non-colluding 
  buyers, making it highly unlikely that bid poolers are going to walk away 
  with merchandise at below market prices. 
  	Government regulators are attempting to police markets they know very 
  little about, and, in their zeal to prosecute, tend to confuse legal 
  syndicates with illegal rings. Meanwhile, because of the investigation, 
  buyers are shying away from using aggressive bidding strategies, which 
  ironically diminishes competition in auction houses. 
  	Ms. Heilman's article can be found in the opinion section of the 
  _Journal of Commerce_, which is available at newsstands in most major 
  cities or through the web (joc.com) on a subscription basis. If you would 
  like a hard copy of her article, reply to this message [to 
  misesmail@red.colossus.net] and provide your land address.