The Myth of the 'Permanent Underbidder'
/An auction myth which needs to be dispelled is that an underbidder is always going to be interested in a coin he previously bid on. This is not true, and I think it is important to discuss why this is so.
1854-D $3.00 graded AU58 by CACG, from the DWN Archives
Let’s say an 1854-D three dollar graded AU58 by PCGS sells at auction for $90,000 hammer, or $108,000 with the 20% buyer’s premium. Many collectors naively assume that their downside risk on this coin is only $5,000—or one biding increment at this price point—since at the time of the sale there was someone interested in the coin at $85,000. In theory, this is correct, but it doesn’t take the fickleness of the typical coin buyer into consideration.
I can think of a number of scenarios in which the underbidder on a coin sold in, say, November, would not be a bidder on the exact same coin even if it were offered just a few months after its previous appearance.
These include but are not limited to the following:
The underbidder simply finds another coin that he likes as much and he purchases it via private treaty.
The underbidder changes his collecting focus and is no longer interested in said coin.
The underbidder has other financial obligations and is not flush enough to bid at a specific point in time.
The underbidder was bidding spontaneously and no longer has an interest.
The underbidder decides he doesn’t like the coin as much when he views it a second time.
On many coins, there are just two bidders remaining once the price reaches a certain level. An example might be a 1795 $10 graded AU58 by PCGS with CAC approval. Just about anyone would be a player for this coin at $175,000, but at the $250,000 level there are likely just two potential buyers. Crazy prices—in this case $300,000 or more—occur when two determined buyers absolutely have to own a particular coin. Remove one of these “gotta have it” bidders, and the price can drop precipitously. But add a third buyer and much bidding hilarity can ensue.
The point I am trying to make here is that when you resell a coin and you are counting on your underbidder to step up, there is a 50/50 shot that he or she has disappeared and is not coming back.
