ANALYSIS
ANALYSIS
Auctions trace back at least to 500 BCE, with Herodotus documenting Babylonian marriage markets – the earliest recorded use of competitive bidding as a resource-allocation mechanism.
From Leonardo’ s Salvator Mundi fetching $ 450 million to Banksy’ s self-shredding masterpiece, auctions have sold everything under the sun. Properly designed, auctions reshape markets, reveal true prices, and inject speed, transparency, and competitive fairness that ripple far beyond the bidding floor.
This five-part series is an exploration to build understanding of the auction’ s role, impacts, and function across industries and economies. In this first note, we set the stage – examining why auctions matter and how their often-overlooked mechanics influence markets large and small, across industries, countries, and through time. _________________________________________________________________
John Maynard Keynes and our bidding brains: The psychology of auctions
How complex could a beauty contest be? Well, great economist John Maynard Keynes(“ rhymes with brains” he’ d often remind people), showed just how deep such a seemingly simple phenomenon can be.
In his famous thought experiment, Keynes asked people to imagine that they were taking part in a beauty contest. He described a newspaper competition in which the faces of several models were displayed, and readers were invited to vote for the one they thought would be chosen as the winner.
The catch lies in the wording. You’ re not voting on who you think is most attractive. Rather, you are voting on which model will be deemed by other readers to be most attractive.
Scratch below the psychological surface, and you’ ll realise it is more complex than that still. Other readers will likely also see the trick. They will be voting not for their favourite, but for who they think others will vote for.
34 REI MAGAZINE NOVEMBER 2025