A perfectly efficient market will push the bids higher and the asks lower. Stocks for example only have a spread of a couple of pennies.
As the markets get less and less efficient, you become more reliant on middle-men to perform transactions. In the dark ages, people would pay 1-pound of gold for 1-pound of salt. In the case of modern society: bonds (and other derivatives) are less efficient to trade and therefore have higher bid/ask spreads than stocks.
Go away from financial instruments, and a 30% spread on bid/ask is actually reasonable. Play Magic: The Gathering? Buying/selling used video games? You're going to pay a pretty large spread.
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"Fair Market Value" is an estimation of the bid/ask spread. There really are two fair prices: the value the buyer is willing to pay, and the value the seller is willing to sell at. These two numbers are all that matters.
By definition, these two prices are fair. Because if they weren't fair, then the buyer (and seller) would reject the deal and the trade will fail.
In my eyes, "fair market value" is roughly (bid_price + ask_price) / 2. In effect, "fair market value" is a survey-result, based on how much buyers are bidding and how much sellers are asking.
80% to 110% isn't a perfect split between the buyer and seller, but its "within expectations".
A perfectly efficient market will push the bids higher and the asks lower. Stocks for example only have a spread of a couple of pennies.
As the markets get less and less efficient, you become more reliant on middle-men to perform transactions. In the dark ages, people would pay 1-pound of gold for 1-pound of salt. In the case of modern society: bonds (and other derivatives) are less efficient to trade and therefore have higher bid/ask spreads than stocks.
Go away from financial instruments, and a 30% spread on bid/ask is actually reasonable. Play Magic: The Gathering? Buying/selling used video games? You're going to pay a pretty large spread.
------------
"Fair Market Value" is an estimation of the bid/ask spread. There really are two fair prices: the value the buyer is willing to pay, and the value the seller is willing to sell at. These two numbers are all that matters.
By definition, these two prices are fair. Because if they weren't fair, then the buyer (and seller) would reject the deal and the trade will fail.