How to Not Regret Paying $3.1M for a Fish
Paying $3.1 million dollars, or 125 times the market price of a fish, might sound quite ridiculous, but according to Kiyoshi Kimura – the president of Japanese sushi chain Kiyomura Co. – it’s a strategic move for his company. At the beginning of this year, Kimura was the top bidder in the first auction of the year for a bluefin tuna, a fish that is facing near extinction. Although Kimura expresses some regret for paying such a high price, he claims that it is an honor to buy the first bluefin fish of the new year, apart from being a great way to “mark your territory” against competitors. Additionally, as reported by the Atlantic in 2014, it’s great publicity for sushi chains to win the first tuna auction of the year.
However, from a more rational point of view, since Kimura expresses regret in paying such a high price for the fish, he likely paid more than the value of the fish for him and his company. In order to obtain a surplus from buying the fish, Kimura should have instead pre-calculated the value of winning the auction for his company and bid based on such value. A rational value could have been calculated as the sum of the market price of the fish and the estimated gains in profit from the publicity of winning the auction. Under the assumption that this was a second price, ascending bid auction (since this would stimulate competition amongst the sushi chains, potentially reaching extravagant prices as occurred), Kimura should have bid up to the pre-calculated value. In such case, if Kimura won by bidding such value, he would have paid the second highest bid for the fish. Effectively, he and his company would have obtained a surplus from the auction given by the difference between the pre-calculated value and the second highest bid (price paid).
Article referenced, written by Neal Colgrass, published on Newser.