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Their bidding rules encourage participants to behave strategically by bidding more than their reservation price, frequently rebidding and waiting until just bef

by oli5679 11y ago

Their bidding rules encourage participants to behave strategically by bidding more than their reservation price, frequently rebidding and waiting until just before the auction ends to place bids. Here's a suggested bidding format that would avoid these problems: (1) Everyone bids the lowest price that they would be willing to accept for completing the task (2) If the lowest bid is unique, the task is assigned to the lowest bidder and they are offered the rate offered by the next lowest bidder (3) If many people bid the same price, one is randomly chosen and they are offered the rate that they bid. (4) If they fail to complete the task according the requirements, the next lowest bidder is offered a quote according to the criteria above. This is just standard auction design theory.

singhrac 11y ago
Second price auctions are pretty great [1]. I'm sure 18F will figure things out the next time around. The interesting 'broken' mechanic in this system is the fact that you can't bid higher than the current lowest bid, which isn't usually a problem. Is fixing that equivalent to having a second price auction (in terms of incentives)? [1] https://en.wikipedia.org/wiki/Generalized_second-price_auction https://en.wikipedia.org/wiki/Generalized_second-price_aucti...
- oli5679 11y ago
  As you say, in a standard auction you can expect the same equilibrium using second price and a traditional bidding system. The difference is that participants need to waste time rebidding after being outbid and can face a technical challenge of submitting bids in time in the scrambles that inevitably occur just before auctions close. However, as you point out, the situation gets worse because we want to create a queue of low-bidders willing to step in should the original winner fail to deliver. Allowing multiple bids and/or bids higher than the current lowest would go some way to addressing this but participants may bid strategically. Eg the current lowest is $50, I'm willing to do it for $70 but don't expect any more bids under $100 so bid $95, failing to get the job when someone else bids $80. Also it's unclear whether I get 2 x 10 days to complete the task if I bid both the lowest and second lowest bid, which is clearly suboptimal and could even lead to people placing a chain of lower and lower bids, completing a functional solution but then deliberately waiting for their lower bids to time out before submitting the solution. A second price auction would be better in this case for both these reasons.
  - singhrac 11y ago
    Good point. The additional problem here seems to be people underbidding significantly (obviously $1 is an extreme), and there's no way for 18F to determine quality. While waiting 10 days doesn't seem like a huge problem, the overhead of iterating through contractors could become huge, especially on time-sensitive tasks. One solution would be to charge each bidder (at the time of the contract, if they're the lowest) a 'down payment' to be involved - where the down payment might be some function of their bid and the next highest bid.

by oli5679 11y ago

singhrac 11y ago

Second price auctions are pretty great [1]. I'm sure 18F will figure things out the next time around. The interesting 'broken' mechanic in this system is the fact that you can't bid higher than the current lowest bid, which isn't usually a problem. Is fixing that equivalent to having a second price auction (in terms of incentives)? [1] https://en.wikipedia.org/wiki/Generalized_second-price_auction https://en.wikipedia.org/wiki/Generalized_second-price_aucti...

oli5679 11y ago
As you say, in a standard auction you can expect the same equilibrium using second price and a traditional bidding system. The difference is that participants need to waste time rebidding after being outbid and can face a technical challenge of submitting bids in time in the scrambles that inevitably occur just before auctions close. However, as you point out, the situation gets worse because we want to create a queue of low-bidders willing to step in should the original winner fail to deliver. Allowing multiple bids and/or bids higher than the current lowest would go some way to addressing this but participants may bid strategically. Eg the current lowest is $50, I'm willing to do it for $70 but don't expect any more bids under $100 so bid $95, failing to get the job when someone else bids $80. Also it's unclear whether I get 2 x 10 days to complete the task if I bid both the lowest and second lowest bid, which is clearly suboptimal and could even lead to people placing a chain of lower and lower bids, completing a functional solution but then deliberately waiting for their lower bids to time out before submitting the solution. A second price auction would be better in this case for both these reasons.
- singhrac 11y ago
  Good point. The additional problem here seems to be people underbidding significantly (obviously $1 is an extreme), and there's no way for 18F to determine quality. While waiting 10 days doesn't seem like a huge problem, the overhead of iterating through contractors could become huge, especially on time-sensitive tasks. One solution would be to charge each bidder (at the time of the contract, if they're the lowest) a 'down payment' to be involved - where the down payment might be some function of their bid and the next highest bid.