RESEARCH PAPER NO. 873

EXPLAINING THE BREADTH OF EXPERT ESTIMATE RANGES IN AUCTIONS OF RARE BOOKS

BY

STUART KELLS

FEBRUARY 2003

Department of Economics. University of Melbourne. Melbourne Victoria 3010 Australia

This paper uses data from 3144 rare book auctions to study the breadth of auctioneers' estimate ranges. The 'information hypothesis' proposes that wider ranges reflect greater uncertainty. The 'reserve hypothesis' proposes that a narrower range indicates a higher reserve price. The information hypothesis is tested by seeing whether estimate breadths are related to the presence of greater information about likely prices. The reserve hypothesis is tested by seeing whether narrower estimate ranges predict 'no sales'. Evidence is found in support of the information hypothesis but not the reserve hypothesis. The paper identifies differences between the auction houses Christie's and Sotheby's in the estimate strategies they adopt.