The Subjectivity of Pricing by Andy Lustig

The pricing of patterns is very subjective. It is not unusual for me to be offered patterns by other dealers at prices that are multiples of what I would pay. Although sometimes this can be attributed to the ignorance of the other dealer, it is more often the result of an honest difference of opinion.

On the other hand, it is not uncommon for me to be offered a coin by another dealer at a fraction of what I would be willing to pay. Although in all cases I work from the presumption that my assessment of value is the accurate one, the truth is that even my expert valuations are subjective.

Furthermore, the subjectivity of pricing patterns increases with the rarity of the coins. A relatively common pattern might appear at auction several times a year. In that case, the pricing structure and history for that coin will be less subjective.

On the other hand, a great rarity may appear at auction only once a decade. In such a case, the price realized will be influenced, perhaps wildly, by many factors. How many collectors need the coin for their collection? Are those collectors flush? Are these collectors loose with their money, or will they only buy at bargain levels? Will there be additional opportunities in the near future for these collectors to spend their money? What have coins of comparable desirability recently sold for? What coins does each of the bidders perceive to be the coins of comparable value? Are the bidders knowledgeable of market conditions? How do the bidders “see” the coin in terms of quality? Are the knowledgeable dealers in attendance flush? And so on. As with private treaty transactions, it is not unusual for my auction estimates to vary greatly from the prices realized.

Novices often make the mistake of assuming that all coins are liquid at near their retail price. While this is true for some items, for example Krugerrands and other common gold pieces, this is rarely true of rare coins.

The following common sense rules apply to most coins, and could in fact be applied to almost anything at all. First, the rarer a coin, the less liquid the coin. Second, the rarer a coin, the more subjective the price. Third, the rarer a coin, the higher the dealer’s margin will likely be.

Patterns, as a class, are the rarest of all coins. One should expect that they would trade more like fine art than like a commodity. It is no more reasonable to expect the coins to be liquid at near the retail cost than it would be reasonable to expect a painting in a fine art gallery to be liquid at near the retail cost.