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What's the difference in the example of the embarrassing public auction? In that example, doesn't one of the two bidders leave the auction when the price rises
by andrewmutz 3y ago
What's the difference in the example of the embarrassing public auction? In that example, doesn't one of the two bidders leave the auction when the price rises over $4? Leading to the same outcome?
- qup 3y agoYou don't choose to leave in a Vickrey auction, your participation is limited to one bid.
- koube 3y agoThat's correct, the price at the end is theoretically the same, but the public doesn't know about the high bidder's price in the second option. The second option (or just a regular auction) just saves you some embarrassment, which is nothing in the end, but in the political world embarrassment is not nothing. The other benefit (for the seller) mentioned was that bidders get a social signal that other companies think the license is apparently worth the current price, which could pressure the price upwards. Versus Vickrey Auctions where it's a completely blind bid. If you're curious, if you google "undercover economist vickrey auction uk" you may or may not find a ctrl+f searchable pdf where you can read this section yourself.