Sunday, January 21, 2007

The Curse of No Winners

Auction theory in economics suggests sometimes the winning bidder pays too much. They call the phenomenon The Winners Curse. Kind of like the LA Galaxy's recent acquisition of Becks.

In DC a "rare" license for a strip club went up for auction. There has been a moratorium on issuing new licenses for sometime (something which in fact is not legal, as we saw in Seattle).

But the $2 million minimum was too high, he decided, and neither he nor anyone else made a bid. Bidders also passed on two dance cages, complete with hydraulic-lift stages, that were going for $5,000 each. The auctioneer had more luck with the two 13-foot dance poles, which quickly went for $50 to Daniel Clark of Severn.

The license was being sold by club owner Ron Hunt, and as one of only 20 such licenses in the city, which has a moratorium on issuing additional licenses, it was considered a valuable asset.

"You're buying an asset that essentially can't be moved because there's so many approval hurdles to open a gentleman's club," Shulman said. "The city has been so developed with high-end real estate. People spend millions for a house, they don't want a gentleman's club next to it. There's no guarantee you could do it."

While the license allows an owner to open a club with nude dancing anywhere in the city that has commercial zoning, a club must sit at least 600 feet away from any schools, community centers and housing. Community members can protest the opening of such a club, and it must get approval from the District's Alcoholic Beverage Control Board

They want 2 million dollars? I'm pretty sure it would be cheaper to sue the city to end the moratorium. Besides, this site is one of the few remaining places that qualify under the zoning requirements. Which -by the way- are also illegal if they rule out every location within the municipality.

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