What is a cut bid?

Bidding was an art. It has since been forgotten, now that computers and their myriad online portals have turned bidding into a purely mechanical process. Things were different just a few decades ago. Back then, there was the “book”—that’s what they called the list where all the written bids were recorded. Then there was the auction hall where the bidders sat. Every now and then, a bid placed by phone would add to the action.
Back then, every experienced bidder had their own method, hoping to discourage their opponents. It wasn’t always successful. The infamous anecdote tells of the incredible price the director of a public institution paid for a Greek coin when he wanted to teach his young (and rather pretty) intern how to bid at an auction.
Others were more cunning, such as a bidder who always responded to his opponent’s bid with a counterbid as fast as a bullet. “Give up, I have more money than you anyway”—that was the message this style of bidding was meant to convey. Occasionally, one also hears the story of the wealthy Norwegian collector who stood up while bidding and fixed his opponent with an angry glare. Many were actually unsettled by this.
Time and again, one reads in novels that someone communicates with the auctioneer using subtle signals (a pencil, a wink, or an almost imperceptible nod). These signals really did exist. Specialized collectors, in particular, used them. Because as soon as they raised their finger, everyone knew it had to be a rare piece, which naturally drove the price up. Occasionally, they would therefore send friends who were unknown in the coin trade to an auction, who would then buy the coveted piece at a low price.
In other words: Every experienced auction-goer had their own method.

The Mickey Mouse Bid

The method most detested by all auction participants was the so-called Mickey Mouse bid. This referred to a bid that was just one euro, one dollar, or one Swiss franc higher than the previous bid. If a collector bid 1,000 francs, his opponent would say 1,001. If the collector then bid 1,500 francs, the opponent would counter with 1,501. This was infuriating. No collector wanted to miss out on a coin because of a single franc.

Occasionally, this led to the dreaded “Mickey Mouse” bidding war. It could go on forever because neither bidder adhered to reasonable increments, but instead slowly fought their way up in tiny steps.

Of course, the auctioneers had a remedy for this: Theoretically, clear bidding increments had been specified in most auction terms and conditions since the 1970s. In practice, hardly anyone besides the auctioneer was aware of them, and even fewer people adhered to them. Most simply bid whatever came to mind.

Since many auction houses did not want to alienate buyers—especially in the late 1980s and 1990s, when buyers were rarer than good collections—the auctioneers grudgingly accepted this waste of time.

Reasonable Bidding Increments

Others consistently stick to the bidding increments they have set and consider reasonable. Just to give you an example, these could be as follows:

Up to 100 euros: 5 euros

Up to 200 euros: 10 euros

Up to 500 euros: 20 euros

Up to 1,000 euros: 50 euros

Up to 5,000 euros: 250 euros

Up to 10,000 euros: 500 euros

Up to 50,000 euros: 1,000 euros

Up to 100,000 euros: 2,500 euros

and so on.

The Cut Bid

While a chaotic jumble of bids prevailed in Europe, such bidding increments had long been the norm in the United States. There, the auctioneer would first announce the last bid and then suggest the next bid to the room. Anyone wishing to bid raised their hand and automatically accepted the bid suggested by the auctioneer.

But back then, many collectors bid through dealers and set firm limits for them. What did a dealer do if his limit for a coin was 1,000 francs, but the auctioneer was pointing to another person at exactly 1,000 francs? Well, the cut bid was created for such cases. If the dealer requested a cut bid, they were allowed to deviate from the normal bidding increments. This way, they could ensure that they either secured the item by slightly exceeding their bid or that the competing bidder purchased the coin well above their limit.

Anyone who wanted to use a cut bid to avoid paying quite as much took a high risk, because the cut bid ended their own bidding process: once you requested a cut bid, you were no longer allowed to bid after that.

Some auction houses still follow this rule in their live auctions.

Online, it doesn’t matter. There, a machine dictates what they bid next.

Well, at least that way, the Mickey Mouse bid is out of the picture! Although one could now complain about the auctioneers who waste our time by skipping a reasonable estimate and setting the starting price so low that many bids have to go through before a sale is made. But that’s another story.

Test and images: Ursula Kampmann