Sunday, February 22, 2009

Price and the Second Highest Bidder

76. Price and the Second Highest Bidder

"Originally published in Ceramics Monthly (http://www.ceramicsmonthly.org), SEPTEMBER, 2003, PAGE 128. Reproduced with permission. Copyright, the Ceramic Publications Company"

When a person tries to sell a car by parking it in some prominent roadside spot with a ‘For Sale’ sign in the window they’re running a sort of “Dutch auction.” That’s a European auction format in which the auctioneer starts with a fairly high price and works slowly downward until someone says, “Yes!” By waiting to respond, you’re gambling that no one else will buy it first. If you correctly ‘read’ the other bidders and the seller’s willingness to continue lowering the price, you can get the sale item fairly cheaply. But, of course, with a car parked along a busy highway you don’t know who the other potential buyers might be and you’d have to make a special effort to meet the seller.

In a classic American style auction, the price starts low and, with all the potential buyers present, the auctioneer tries to persuade people to offer greater and greater sums of money, however much it will take, to win away the item being sold (within the limited time period of the auction). Auctions in this style thrive on the emotions and natural competitiveness of the bidders. In the heat of the moment prices may rise far above any normal, reasonable level through an unreasoning desire to possess. The seller loves this.

On the other hand, unlike the ‘Dutch’ format which only requires a seller, a buyer, and an imagined second potential buyer, the American format is absolutely dependent on the activity level of the second bidder. It is the second bidder (or third, or fourth) who drives up the final price by repeatedly attempting (through higher bids) to become the winning bidder. The final winning bid is not set so much by the winning bidder’s willingness to pay as by the second bidder’s ultimate unwillingness to pay more. If the second bidder gives up early, the winning bidder gets a bargain and the seller loses out.

As an artist, particularly when setting your prices at a gallery (or when setting a reserve price at an auction) you are placing yourself in the role of the second highest bidder. For instance, your sculpture has been priced at five hundred dollars. In effect you would rather give up the object than turn down the money. But you would rather keep the object than sell it for less than five hundred dollars. If the customer is unwilling, or unable, to pay the full five hundred dollars they will not be the winning bidder and will not go home with the sculpture. You, in effect, will be the winning bidder, and you get to go home with the sculpture.

I mention all this because I have several times heard stories of artists who didn’t really want to sell particular works of art and so, put what they thought were outrageous prices on them and had them sell anyway. In effect, they were outbid for ownership of the object even when their final bid seemed ridiculously high. The thing is, if this happens to you, you can not whine about it later. You determined what the winning bid would be. It’s up to you to appropriately appreciate getting the money.

The reverse also holds true. If the price is set too high and no one buys the object you have, in effect, made yourself the winning bidder. You may not have shown the piece in its best light or to the right group of potential bidders but, today at least, you won. You get to keep the object.

Tomorrow you may decide that it’s not worth as much as you previously imagined, and you’ll be free to lower the price (or raise it even higher if the mood strikes you). But never lower it to the point where you’ll feel cheated if it sells. Once it sells all you have are memories and money. You don’t want to have the world’s greatest collection of your own stuff but neither should you feel unhappy to be the second highest bidder. As an artist, being the second highest bidder is how you sell your work. Learn to be cheerful in the role, and good luck at the auction.


“Every person who gets a piece of art cheap is another person who thinks art is worthless.” -- Rudy Autio

4 comments:

ReversedCircle said...

While I was in Moscow, I bought a painting called "Bauker" (The Biker) outside the Tretyakov Modern Art Gallery. I was told beforehand the painter won't accept a price that is too low. I managed to talk him down from $800 to $300 and I felt bad about it, because I could see he needed the dough. The painting was well worth $800. At the time I just didn't have the cash on me. Artist to artist, I still think of it as having a permanent black mark on my soul for that.

Larry M. Brow said...

I'd say you paid what you could, and didn't just walk away. And who knows what good the $300 did in his life that day? The hardest part in haggling over art is not being disrespectful. If I ever lower my price I don't want it to be because you convinced me that the object just wasn't good enough to justify the original price.

French Fancy said...

It must be so hard setting a price on one's work. Even more so in the current climate. Oh jeez, I've gone all doom and gloom again.

Larry M. Brow said...

FF,

I think the secret (to avoiding the doom and gloom) is to not absolutely need the money. Easy to say, I know, but when people have only one source of income they are inherently vulnerable. Also, needing too much makes you vulnerable. Perhaps irrationally, I'm currently feeling low key.

It is hard setting a price, though, when it makes you look like a delusional egotist. You want HOW much? For THAT?

L