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Re: The Bid-Pooling Myth

  This seems like nothing more than a variation of the old "collusion is
  difficult so it won't work so it will never happen so don't worry about
  it" argument which gets refuted empirically every time another cartel is
  caught.  Plus the old "they don't understand the particular nature of
  our industry" argument that also gets trotted out by price fixers every
  The only difference that I can see is that many of these auction
  markets are quite specialized, so there often are not dozens of truly
  interested bidders at any one time who are interested in any particular
  item.  So I find the possibility of collusion to be credible.  Of course,
  as the message points out, there may be times when allowing a buying
  syndicate can be pro-competitive - for example, for a particularly large
  or risky item. But I'll wager that the cartels were not limited to
  these situations.  Collusion in auction markets should not be given a
  green light.
  Bob Lande
  On Thu, 10 Jul 1997, GC-Etchison, Michael wrote:
  > [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.