BizJournals Portfolio
Home >   Business Views, Opinions and Blogs >   Business Blogs >   Market Movers >  

On Auction Houses Estimates And Reserves

Market Movers

by Felix Salmon
Main
Has Nassim Taleb Killed Black-Scholes?   Mystery Stock Update

Recent Blog Posts

Links

Nov 08 2007 12:00am EDT

On Auction Houses' Estimates and Reserves

There's something I've always wondered about auction-house estimates: are they estimating the hammer price, or are they estimating the final sale price, including commission? The auction house press releases, and newspaper reports in the wake of the auction, always talk about the latter: they'll compare the price including commission to the pre-auction estimate. But last night at Sotheby's, a Van Gogh with an estimate of $28 million to $35 million was passed, unsold, after bidding stalled at $25 million.

Now the auction house’s commission is 20% of the first $500,000, plus 12% of the rest. Which on a $25 million hammer price would mean a total of $3.04 million. Add that to the $25 million hammer price, and you get $28.04 million – which is above the low estimate. And you surely can't have a reserve price above the low estimate. Or can you?

. □

Comments

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.


Connect With Portfolio.com
Like Portfolio on Facebook

Come on, like us—you know you want to.

Follow Portfolio on Twitter

Follow us and if you're an innovative entrepreneur, we'll return the favor.

The Mix

Today's top stories, conversation starters, and the back nine business bites.

spotlight on

People & Ideas

Whisky To-Go-Go

Now there's a company that let's you taste your knowledge of fine blended Scotches by mixing a whisky of your own. Read More