There are 2 things that I see going on with this sale that has others scratching their head...
1. Just like many classified ads you see these days where people over exaggerate about the condition as "amazing" or "mint" or "like new" or "hardly used" and so on, but you can clearly see in the photos the chrome is pitted, corrosion, heavy use, etc. I see vintage road bikes from the 70's and 80's on eBay and CL on a regular basis that are in truly beautiful original condition with very few miles. So while this bike is in good original condition it is far from outstanding or incredible.
2. The reason for the higher than normal Varsity price is because its a "Bicentennial" and somebody wanted it, maybe they had one when they were a kid and lost the last few that came along, so they were willing the pay the starting bid price even if it meant overpaying a few hundred. I see buyers on a regular basis do the same thing with cars, they get emotionally wrapped up into the hype, don't carefully look the photos, don't care that they are overpaying, and just pay the price.