Violin Auctions–Are they worth the price tag?
While browsing through classical music industry news, it is often that we see articles with headings such as: “300-year-old violin sold in auction for over 20 million”. Why is that these ancient instruments are able to sell for so much? What makes them so valuable to people? A deeper dive into the theory behind auctions and violin making will better explain these seemingly absurd price tags.
Violins are generally sold at auctions by violin crafters or private collectors (the seller) to several potential buyers who either need an instrument to perform with or collectors and organizations who are looking specifically for rare and antique instruments to put on display. Violins can generally range from 500 dollars for a base model up to several million depending on the craftsmanship, design, history, and previous owners. In particular, the history and previous owners of a certain violin actually make up most of the price tag. For example, recently, in May of 2022, the “da Vinci” Stradivarius violin that was once owned by famous Hollywood musician Toscha Sidel was sold for an extremely price tag of $20 million dollars in an ascending bid auction.
How did the sellers of Seidel’s violin work their “marketing magic” to use their knowledge of ascending bid auctions and the violin’s history to their advantage? There are several factors that come into play. First, the name “da Vinci” actually has no relation to the artist Leonardo da Vinci and is simply a marketing tactic to bolster the reputation of the violin as a valuable good. For many art and antique collectors, a reputable name such as “da Vinci” will automatically increase the amount that they are willing to pay for the violin, therefore benefiting the seller. Additionally, Seidel has a long history in the classical music world that may also incentivize people to purchase the violin at higher prices and continue to push the bid price up. For example, Seidel performed for the film scores of “A Midsummer Night’s Dream”, and “The Adventures of Robin Hood”, was friends with Heifetz (another famous violinist), and even Albert Einstein took violin lessons from Seidel. Knowing the rich famous history of the previous violin player can inflate values to extremely high prices due to ‘bragging rights’ and setting new records for the highest violin sales.
So how do these artificially high prices based on ‘values’ that are set by people who aim to purchase related to bids? Well, an ascending bid auction is where bidders name higher prices until there is only one bidder left in the auction. Since the price was inflated more by some of the external characteristics (things that are unrelated to the actual quality of the violin), the buyers seem to be in general at loss. But the ascending bid auction tells us otherwise–the dominant strategy is to stay in the ‘game’ until the price reaches a personal highest set value. This is because each bidder in an auction has an intrinsic or true value for the item being auctioned, meaning that they are willing to purchase an item for a price up to the value, but not any higher. Anyone who isn’t willing to pay at the bid price drop out of the game as their dominant strategy–this is any player’s most optimal strategy. It wouldn’t be logical to drop out before the price reaches your value or for you to overbid the value since the payoff would be higher than you want it to be. This means that even if the prices of the violins seem drastically high for normal day-to-day people, there are enthusiasts who are willing and able to pay the price tag. Maybe a 200 million violin is not worth it for me, but game and auction theory tells me that it is worth it for someone else out there and all they have to pay is slightly above the second highest value.
Additionally, an interesting thought experiment is whether the violin would still sell for as much if another type of Auction system were used. For example, if a Descending Bid Auction were used, the seller may set a high price of 25 million and drop until a buyer is willing to buy.
Resources:
https://www.smithsonianmag.com/smart-news/this-308-year-old-violin-could-mark-a-new-world-record-180980051/
https://www.nytimes.com/2022/05/09/arts/music/seidel-stradivarius-violin-auction.htmlhttps://
www.bloomberg.com/news/articles/2022-03-09/a-rare-stradivarius-estimated-at-20-million-heads-to-auction?leadSource=uverify%20wall