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The revenue equivalence theorem for auctions suggests it doesn't matter that much. Now, empirical testing has shown violations of this theorem, but the magnitud
by asdfasgasdgasdg 5y ago
The revenue equivalence theorem for auctions suggests it doesn't matter that much. Now, empirical testing has shown violations of this theorem, but the magnitude of the violations are not so huge as to really move the needle. Someone might be paying 10% more in a sealed bid first price auction than they otherwise would, but it's unlikely that it's more than that, and it may be a good deal less or none at all.
No matter how you transact, of the good is too scarce compared to demand, the price is going to be high. We've seen skyrocketing prices in the US too and we don't use a sealed bid first price auction for the transfer of houses.
- otterley 5y agoA 10% difference translates to a lot of money for a middle class homebuyer. That’s often enough to buy a new car.
- cortesoft 5y agoA 10% difference here in Los Angeles would be enough to buy a house in many other parts of the country.
- asdfasgasdgasdg 5y agoYes that's obvious. Surely it's equally obvious that 10%, as an upper bound on the contribution of sealed bids to the problem, is not the main issue?
- otterley 5y agoI would refrain from using the word “obvious” since many things we believe to obvious are non-obvious to others. Better to explain your point clearly and with greater detail. The point I was making is that it’s too easy for us not to consider the implications to average or poor people of the proposals we make. It’s not that it’s the main point, but we also must not trivialize errors.
- convolvatron 5y agodoesn't it effect the rate of cost growth?
- shkkmo 5y agoa 10% bump over market price quickly adds up to a high rate of price increases simce that bumped price helps form the new, higher market price which is then bumped up by the auction process even higher. In addition, the process being described is NOT a "sealed bid first price auction" as the seller opens the bids and requests rebids without disclosing the current winner or top bid. The only reason to do this over a normal auction of that type is to trick people into thinking they didn't win, so they bid higher.