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Inefficient markets

Tacit collusion

Prisoner’s dilemma at Sotheby’s

Alfred Taubman, the majority shareholder and former chairman of Sotheby’s, was recently sent to prison for his part in a conspiracy to fix prices with rival auctioneer, Christie’s. Sotheby’s former chief executive, Diana “DeDe” Brooks, was also convicted. The trial judge accused the two of many failings, including arrogance, greed and deceit. From a business perspective, their real crime was stupidity.

In the early 1990s, rivalry between the two auction houses was causing heavy losses to both. Taubman apparently told Brooks that they were “killing each other on the bottom line and it was time to…

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