Auction houses have devoted extensive resources
toward protecting sellers, but have invested limited effort into
protecting buyers. Why?

$10,000 and felt very strongly about his loss. His situation and (negative) feedback for the seller carried the same weight as someone who lost one dollar in an auction.

0.8

Dissatisfaction rate (worst-case)

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0

Post-1900 Books antiques

Paintings

0.06

Worst-case dissatisfaction rate Best-case dissatisfaction rate

RESULTS AND ANALYSIS

The results of our preliminary survey are as follows: We received 98 responses from the auction “winners,” 21 of which either did not receive any item at all, or did not receive what they were expecting (mostly because the item was damaged or otherwise in worse shape than described). Further, eight out of

98 received absolutely nothing at all, which represents 0.62% minimum (assuming everyone else, including non-respondents, received something, as we will discuss). This incidence would be 62 times higher than official estimates of fraud, and this is clearly a subset of all fraud.

If either the buyer received nothing or did not receive what was expected, we call that “swindled” (recognizing, of course, that the buyer may or may not have been intentionally swindled and that this is definitely a superset of purely fraudulent activity). Still, knowing the incidence of “swindling” is important because it most certainly is an input into buyers’ perceptions of the fairness of auctions.

We calculate the worst-case rate of negative response (by dividing the total negatives by total responses) and the best-case rate (by dividing the total negatives by total contacted). It depends on how one views the representativeness of our sample to know which is more “accurate.” If one feels that the respondents are representative of the population at large, then the worst-case estimate would be closer. If one

0.05

0.04

0.03

0.02

0.01

Dissatisfaction rate (best-case)

0

Collectible Computers/ Jewelry excl Pottery Event clocks electronics watches and glass tickets

Metalworking Cameras Major Guitars Sports Watches equipment and photo appliances memorabilia

Figure 1. Dissatisfaction rates for different categories.

feels that our respondents are “disgruntled,” then the best-case estimate would be closer.

In addition, we have two opposing factors. For those who are embarrassed about being cheated, they will be underrepresented. They do not want to report that they were cheated because it would make them look foolish. On the other hand, there are people who were cheated on one auction and are so mad they want to tell their story, even if we asked them about a different auction, and that will lead to overestimation. The true rate would most likely fall somewhere in between the best- and worst-case estimates.

The percentage of negative responses varied for different categories of auctions (see Figure 1). Computers and electronics had the highest worst-case rate of negative responses: three-quarters of respondents either did not receive their computer or it arrived damaged. In terms of the best-case rates, the worst category was Jewelry (excluding watches), in which 5% of all auction winners contacted either did not receive anything at all or did not receive what they were expecting. Four categories had no negative responses (Paintings; Guitars; Event Tickets; and Watches). One surprise was that Jewelry, excluding watches, had one of the worst rates of dissatisfaction, while Watches had one of the best. In one category,