Porsche Model FLOP: How One Man’s Accent is Another Man’s Confusion
https://www.cnbc.com/2019/08/18/20-million-porsche-flops-in-auction-snafu.html
https://rmsothebys.com/en/home/buy/#/sect-464335
Can you imagine getting a Porsche for less than market value? They are already luxury vehicles, but a unique antique model was planning on being sold at an auction and wasn’t bought above the minimum asking price.
About two months ago, RM Sotheby’s was planning on auctioning off a 1939 Porsche “Type 64.” Here is what the vintage vehicle looks like (photo credit-Hemmings.com):
It was expected to sell for more than 20 million. The bidding started at 13 million and was going to increment by 1 million. It was done in the style of an ascending bid auction, where the winner pays his or her bid. As an ascending bid auction (which behaves similarly to the second-price auction), we know in Networks that this means the dominant strategy is for each bidder to bid at true value and to stop when the price goes higher than their value.
In this case though, some people thought the auctioneer was saying “70 million” instead of “17 million.” For a car worth more than 20 million dollars, it would be a jump of about 50 million for the car’s price. Because of this, no-one decided to bid after this point, meaning that either 17 or 70 million was too much for the car. However, it was expected that the car should be sold for at least 20 million dollars, so the car never got sold because it was lower than the minimum sell price.
Because of this snafu, it would be even more interesting to see how RM Sotheby’s auctions work in the first place. In looking at the company website, RM Sotheby’s specializes in auctioning off collector cars, and the premise is an ascending bid auction (while they don’t give specifics, in absentee cases, the designated representative will bid up to the bidder’s value and then drop out from the auction once that value is surpassed). But, RM Sotheby’s also has a minimum sell point, so if all bidders don’t have a value higher than the minimum selling point, the car just won’t get sold.
With this into account, favorable bidders for the company are the ones who value the car at higher than the minimum sell point and hold out to more than twice the minimum sell point, which would give a large profit margin to the company.
So, while a spoken stumble curtailed this Porsche sale, bidders will be keeping an open ear to when the price jumps a little too high for comfort.