Asking prices, selling prices, and anchoring effects: The elusive relationship of pre-sale estimates to winning bids in fine wine auctions

Commercial auctions of cultural goods are typically brokerage arrangements where potential buyers may consider pre-sale estimates (PSEs) in bidding. The economic theory suggests that PSEs should provide honest guidance – winning bids should, on average, equal PSEs – but available research from fine art and antique auctions finds otherwise. The authors examine this relationship for commercial auctions of fine wine – items which, unlike fine art and antiques, are widely traded so that bidders may more knowledgably interpret PSEs.

The paper examines the relationship of PSEs to winning bids econometrically for an iconic wine widely traded in several Chicago wine auctions, a novel setting for this analysis.

The relationship of winning bids to PSEs differs significantly between two neighboring auction houses, perhaps reflecting differences in how they do business; neither’s PSEs have a straightforward relationship to winning bids; PSEs have an influence on winning bids independent of a lot’s characteristics, reflecting perhaps an anchoring effect; the analysis suggests broad bidding strategies (with counter-strategies implied) and might guide auction house lot selection and ownership if more complete data became available.

The role and reliability of PSEs in auctions of other cultural goods, representing most of the literature, has limited application to auctions of fine wine whose markets differ categorically from those of other cultural goods.