What would a fanatic Bid?
The world has many auctions of many forms – first price, second price, sealed bid, open bid and many more. The success of all of these auction formats, however, depends on the same thing – the existence of a set of market clearing prices which maximize the auctioneer’s or seller’s payoff.
To determine the market clearing prices you need the true values of each buyer. In some cases, it’s easy to determine a buyer’s true value for an auctioned item. After all, you only have to ask how much would a person be willing to pay for this item. If you are selling a car, you know the price wouldn’t go much over what the car is worth as a sum of its different parts and its brand name, so you could guess the range of bids buyers would be willing to make. But what happens when you find out the car belonged to Elvis? Or Beyoncé?
Some people still wouldn’t care, but to others, the car might now be worth infinitely more. If it belonged to Elvis, there’s only a limited number of cars left and Elvis fanatics would pay much more than the car’s objective salvageable value. If the car belonged to Beyoncé, it might not be as limited yet – Beyoncé future is as yet undetermined. For all you know, she might open a motor company and decide to start driving all her car’s before selling them. Then, the uniqueness of the car goes down. Or, she might decide to take apart all her old cars and only leave one behind, then her old car might be worth a lot more. What is the car worth to bidders now?
Furthermore, even if your market size reduces after the market reaches a certain price, the market clearing price is very hard to determine. It heavily depends on how sentimentally attached fans are to Elvis or Beyoncé and what their financial conditions are. Is there a fan who once spent all their pocket money on the artist’s album? Is there a fan who lived all of his/her life wishing they could be a part of the artist’s clique? Is there a fan who sees the artist as the replacement for someone important in his/her life, perhaps a parental figure or an ex friend or lover? It’s hard to gauge how much the fan feels involved with the artist. Moreover, the biggest fans might not be able to pay too much and fans who could pay a lot might not want to for this item, then, the market clearing prices might not be very high. On the other hand, the biggest fans might be the ones who can pay a lot for this item and then your market clearing price would be very high. The height of their zeal is hard to determine. So the range of market clearing prices, can never be predicted. As soon as sentimentality becomes attached to an item, the range for a successful auction becomes unpredictable. Here are some other items that were sold for a lot more than you would expect them to if they didn’t belong to anyone famous:
http://flavorwire.com/102155/the-10-most-expensive-pieces-of-celebrity-memorabilia
and here is a list of Elvis’ cars:
http://www.elvis.com.au/presley/elvis-presleys-cars.shtml