All along the British waterways there are thousands of long term mooring spots that are owned and managed by the Canal and River Trust. For those of us looking for such a mooring, these spots are available to rent for up to three years through the CRT’s auction website. Just like another well-known online auction site, some of these spots are ‘buy it now’ while others are auction-only.
I’ve had my heart set on a particular spot, not least for its beautiful vistas and proximity to shops and other facilities, but also because it is one of the CRT’s few long term mooring sites that has electricity and water supplied to every berth. This is important to me because, even though I have solar panels and a generator, I still have NO idea how the electrics work on my boat. (Thank you for not judging me.)
Anyway. Today, for the second time in as many months, I failed to win an online CRT auction.
Now… which word would best describe the way I feel about this? Oh yes.
Yes, that’s exactly what I am.
Tales from the canalbank
Most CRT long term mooring sites have few facilities, with only one shared water tap – or even no water tap – and may or may not have somewhere nearby to dispose of one’s personal manure. When I see some of these expensive moorings – basically just a space at the side of the canal, with a mooring ring if you’re lucky – I find myself wondering what exactly the CRT are charging for.
I’ve had my heart set on a particular spot, not least because it is one of the CRT’s few long term mooring sites that has electricity and water supplied to every berth.
Two months ago I went down to this comparatively deluxe mooring site and chatted to a few of the locals. They assured me that not one, but two mooring spots were due to become available. ‘Come and join us!’ they proclaimed, which was jolly friendly (I thought). I emailed an enquiry to Maria Osborne, aka the moorings manager at the CRT, who warned me that the site was ‘very popular’. So, when the first spot came up for auction, I decided to stake my claim and bid early. Risky, perhaps, but that’s what I did.
For the win…
CRT auctions run for two weeks, and it was a full 13 days later before I received an email notifying me that I’d been outbid. Now, I’d put a whopping top bid on, which was much more than I was ultimately hoping to pay. Other people had been bidding away in increments to try and outbid me. By this stage the price was over my maximum, and well over the starting reserve.
Surely I wasn’t prepared to bid any higher than my absolute over-the-top maximum?
Well, yes, apparently I was. Right at the last minute I compulsively bid again, a further £300 (!), just to see if I could tip the auction in my favour. Alas no – I had been automatically outbid. Weirdly, this was a relief; the final price was way too high. Something like £1200 over the starting price, and far more than I thought the spot was really worth. When I thought about the other bidder, I felt a little remorseful that I’d bid so early and helped push the price up so high. But it was too late now to do anything about it. Plus I had inside information about the second spot about to come up for auction.
Twenty seconds to comply
Sure enough, a couple of weeks later, another long term mooring spot became available in the same location. This time, I decided, I would wait until the last minute.
No – make that the last 20 seconds.
Surely I wasn’t prepared to bid any higher than my absolute over-the-top maximum?
I was already logged in, and all my banking details were preregistered. I was watching the time on a second-by-second basis. The bidding was still low. There didn’t seem to be much interest. My iPhone was raised. My finger was poised. I am about to jab the button…
All good? Have I won yet?! Have I??!!
Well, no. Imagine my horror, as I am placing my last-twenty-second bid, only to find the CRT website diverting me here, there and everywhere to reconfirm my details, bank card number and security code. Jab. Jab. I am on tenterhooks. Jab. My fingers are shaking. Jab, jab, jab. The seconds are ticking away. Jaaaab. And what do you know, f*ckety f$ck f#ck, by the time it has been authorised by my bank – the auction is over.
For the love of FUCK.
Sick as a pig
Even more sickening was the fact that the end price was well below what I was prepared to pay. But I’ll tell you who should be even MORE sickened. That’s the person who outbid me last time. He’s the one whose bidding I helped push up to a massive £1,000 more than his new neighbour will have to pay.
One. Thousand. Pounds. More.
For an identical spot.
In the same place.
Well, I… er…. What can I say? Sorry, and all that.
There’s a bigger issue here, though, and that is the CRT’s use of online auctions to establish what they describe as ‘market value’ for their long term mooring spots. Two people in a bidding war is not market value, but an artificial bubble based on independent private value; and what is unacceptable, in my view, is that individuals are paying such wildly divergent prices on identical, adjacent mooring spots.
Two people in a bidding war is not market value, but an artificial bubble based on independent private value
So my ranting is all very well and good, but I want to get serious for a minute. As a consequence of today’s diabolical events I’ve spent a bit of time trying to get my head around something I hadn’t actually heard of before. And what might that be? I hear you cry. And I will tell you. It is auction market theory. Turns out it’s a thing. Read on.
The science bit
OK. So the CRT carry out pricing reviews which are documented quite transparently – if not prominently – on the internet. Here, for example, is a CRT pricing review of their long term mooring sites on the Kennet and Avon. Here it is clearly stated that prices are determined based on factors such as a site’s proximity to amenities, facilities, and local competition in the form of private mooring providers (eg. marinas). According to my (admittedly recent and imperfect) understanding of auction market theory these confer what’s known as common value. In other words, there is an objective value to the thing in question.
Common value is linked to a more-or-less stable market value, such as the current price of, say, arable farmland or used Ford Fiestas. By contrast, independent private value is entirely subjective, and boils down to whatever unpredictable amount the buyer is prepared to pay for something that has an intrinsic value for him or her.
For instance, the gold rings that belonged to my grandmother have a relatively low common value; but have a high private value that is personal to me. At auction, their sale price would likely be low as it’s unlikely anyone else would place a high private value on those rings. However, if an estranged (and malevolent) relative got into a bidding war with me, the rings could sell for vastly more than common value (or common sense) would dictate. In this case, you could argue that private, subjective value has artificially inflated the price.
Market value or private value?
There are lots of auction models, such as the sealed bid (favoured in certain real estate markets), the English auction (price ascending, favoured in auction rooms), the Dutch auction (price descending, favoured by certain shopping channels) and the ‘hard-close’ English auction. This latter is also known as the time-interval auction – which is favoured by eBay and, yes, the CRT. This is a price-ascending auction that ends at a specific time.
The hard-close auction leads to curious time-related bidding phenomena, such as those unwittingly modelled by me. Such as: bidding early to scare off the competitors (didn’t work), and last-minute bidding in an attempt to snipe competitors and/or avoid a bidding war (also didn’t work). However, NONE of these auction models rely on an assumption of common value, but on independent private value – a perception that buyers will pay according to what the object is worth to them. Private value, combined with the essentially competitive nature of auctions, is proven to push the price up.
The hard-close auction leads to curious time-related bidding phenomena, such as those unwittingly modelled by me.
In a nutshell, auction market theory tells us that private value auctions are never intended to establish a ‘fair’ market price. They are designed to extract maximum revenue for the seller. That’s all very well on Ebay when maybe you’re only bidding for a vintage handbag. But when you’re bidding on a CRT long term mooring auction, you are bidding on land – albeit a tiny stretch with a couple of mooring rings. In other words, this is rent-bidding.
Rent-bidding is illegal in some places, I’m just saying
Dr. Garrick Small, an Associate Professor at CQ University in Queensland – where, by the way, rent-bidding is actually illegal – has conducted research into auction behaviour. He has spoken out against the use of online rent-bidding apps in Australia, arguing that the practice increases landlord monopolies at the expense – literally – of tenants. ’This is because the supply of land is strictly limited,’ he says, ‘giving excessive negotiating power to whoever owns it.’ He goes on to explain that such power imbalances are exacerbated by online auctions which produce anomalous bidding behaviour and inflated prices. ‘People are easily encouraged by necessity to bid excessively in auctions. This is despite full knowledge of the ruinous consequences.’
It’s one thing for private companies such as estate agencies to use rent-bidding to capitalise on a captive market. But the CRT is a charitable organisation. As the principal custodian of Britain’s waterways, it already has a monopoly on long term mooring sites. Doesn’t it have an additional responsibility to act ethically, and commit to responsible pricing?