Supply & Demand at Auction Napa Valley

Posted by Tom Wark on Jun 5, 2006

My economics professor in college lectured the class that near all pricing could be explained by one simple rule: Supply and demand. On its face this is a pretty simple rule. Count up the supply. Measure the demand and voila. We all knew and so did he that it’s a tad simpler than that. Another thing he taught us was to be careful to accurately identify what the object or item under consideration is.

That brings us to this last weekend’s "Auction Napa Valley" where a single lot was purchased for over $1,000,000.

Ms. Joy Craft of Woodside California, an investor, bid just over $1,000,000 on a lot that consisted of a trip to the various top Chateau of France, the country’s best restaurants and number of magnums of Staglin Family Vineyard wines. Over $1,000,000.

Having heard this my economics teacher would have put on that knowing smile of his and turned to the class and asked, "How does supply and demand explain spending $1,000,000 on something for which  the high bidder could have easily spend far less and gotten far more?"

I was the kind of guy who would have raised his hand and said something like, "Supply and demand doesn’t apply because it’s charity". To which the good professor would have responded, as he so often did, "I’m sorry Mr. Wark you are once again incorrect."

My problem was that I would not have accurately assessed what was really being purchased by Ms. Craft.

While philanthropy is certainly on the mind of many of the bidders at this weekend’s Auction Napa Valley, there is also another aspect to the event: Recognition and Stature.

I know this sounds cynical. However, there are only so many opportunities to be recognized and granted the stature that comes with spending abnormal amounts of money at a wine auction. That is, the supply of stature and recognition  at the most famous of charity auctions is very limited, while the demand for that recognition and statue is high.

The auction this weekend, hosted by American Idol star Ryan Seacrest, raised over $8,000,000 for Napa Valley health organizations. Though down from last year’s $10,000,000 take it is a most robust community offering for which Napa Valley Vintners should be very proud.

As it turns out, the demand for quality health care is greater than the supply. So, prices for it are high. Ms. Craft’s philanthropy and her desire for stature and recognition, as well as the efforts of the Napa Valley Vintners helped bring the supply of health care in Napa Valley a bit more in balance with the demand.