Al Roth at Market Design, once again commenting on bidding in auctions while not intending to pay as a form of protest. (Earlier he posted on a similar tactic in an BLM oil and gas lease auction; here was my earlier post on his earlier post.) Roth cites the New York Times: article one, article two. A story on the same topic appeared in the Wall Street Journal.
The very practical “market design” concern is how the auction manager can prevent such protest bids, short of, say, requiring everyone to pay their million dollar bids in cash before they leave the room.
Or, as Roth put it, “One aspect of auction design that may need greater attention if these kinds of disruptions become commonplace is how to qualify and verify bidders and winners, and notify other bidders in the event that winners default, so that auctions can be made more resistant to attack by fake bidders.”
Apparently auctioner Christie’s policy allows the seller to request that Christie’s attempt to directly negotiate a sale to the party submitting the next highest bid in these cases. However, in this case the seller has indicated he would retain the property if the winning bidder will not pay.