Horological Meandering

Buyers will almost certainly know to check what (if any) buyer's premium is payable on top of the hammer price.  Therefore, the price inclusive of the buyer's premium is what the buyer is willing to pay (or can be taken as what the buyer is willing to pay) and can from that point of view be said to represent the 'correct' or 'market' price for that watch.  

Thinking a bit more about it (always a risk), if the buyer pays the ('market') price, why doesn't the seller realise the same ('market') price?  The difference is of course the buyer's premium paid to the auctioneer - often well earned.  So the difference between what the buyer pays for the purchase and what the seller receives for the sale is the fee paid to the intermediating third party.  There might be a rough and ready analogy to be made with fee commissions paid to real estate agents for the sale of a house.  In the places with which I have a bit of familiarity, sometimes it's paid by the seller, sometimes by the buyer and sometimes it is split, but I have a sense that when the house and its price is marketed as having been 'SOLD!', the sale price does not include a reduction to account for commission paid by the seller nor any increase for the commission paid by the buyer.  

Keeping with the housing context, but maybe switching the analogy from agent's commission to stamp duty (ie, treating the buyer's premium as a kind of transaction tax paid to a third party), the stamp duty paid by buyers (again, for housing transactions in the places where I have some familiarity) is an amount over the 'sale' price and together represent the whole amount the buyer is willing to pay for the property.  But here too I don't think the government stamp duty paid by the buyer is considered to be part of the property's 'price'.  

For those locations, and in relation to both contexts (agency commission and stamp duty payable on the sale and purchase transaction) at least when the property sale and purchase is recorded in the government registers, the price of the property sold and purchased does not include any additional commissions/levies/duties separately payable to third parties even though the buyer knows ahead of time more has to be paid to 'get' the property.  Of course this could be just local practice and in our context of watch auctions the practice can vary across location and time (does anyone remember when there was no buyer's premium?).

One last point.  More of a thought experiment I suppose.  Hypothetically, say the buyer of a watch hammered for 4.0M and for which 5.0M is paid including the buyer's premium instantly wants to and does sell the watch at auction a moment later at the same auction (so that we can assume for the time being that the 'market' price of the watch has not changed in that split second) and the new buyer is willing to pay the exact same price the first buyer paid (ie, no change in 'market' price).  There seems to be a problem.  For the first buyer to recover the full 5.0M 'market' price of the watch, the buyer would need to receive 5.0M (since that is purportedly 'correct' price of the watch).  However, that means the watch will need to hammer at a winning bid of 5.0M, meaning that the new buyer would need to pay over 6.0M (including buyer's premium).  So, in our hypothetical scenario where the first buyer instantly re-sells at the same market price within the same auction, the problem is that either the new buyer cannot actually buy at the same 'market' price (based on the all-in price, as the new buyer would need to pay 6.0M for the first buyer to receive the putative market price of 5.0M) or the first buyer cannot sell at the 5.0M 'market' price (but at 4.0M) so as to allow the new buyer to buy at the 5.0M 'market' price.  That internal impossibility appears to be resolved or does not arise if we treat the buyer's premium as not being part of the 'market' price of the watch and simply a third party commission, tax or levy payable to allow the buyer to acquire the item at its 'real' market price.  In the above hypothetical, the first buyer could immediately re-sell the watch at auction at the 4.0M hammer price for which it was first purchased and the new buyer could correspondingly buy the watch at the same price (winning the bid at the same 4.0M hammer price).  Both first and new buyer win at the same hammer price and pay the same buyer's premium to the auctioneer (which is now very satisfied!).  The first buyer is actually down by 1.0M overall but not from the fall in the price of the watch but from the new sale price remaining the same and thus not covering the third party commission paid to acquire the watch, and the new buyer would need to sell the watch subsequently at 5.0M (which on this account be a price increase) so that the increased price of the watch covers the additional third party commission not forming the price of the watch.  The above problems, resolutions, workings out etc for me all point to the same conclusion, which is that the 'correct' and 'market' price of the watch is the hammer price (often referred to interestingly as the 'sale price') and that the buyer's premium is an external cost which is not part of the market price of the watch.   

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