4 ms·

If two people at an auction get into a bidding war, do the bids tell you nothing about their psychology?

Art9681 3y ago
Behavior is different at different scales but I see your point. I typically walk to my car after an event, but if I see a group take off running with urgency I will probably do the same thing. Know what I mean?
AlexandrB 3y ago
It depend on whether they are also trying to use each other's bids to determine each other's psychology. At that point you may be observing a recursive system (I know that he knows that I know that he knows...) and can't be sure how many layers of reasoning each actor is employing.
teeray 3y ago
You may think so, until it’s revealed that one of the bidders makes all bidding decisions by roll of a die / flip of a coin (you can invent some scheme for doing so).
- jjoonathan 3y ago
  A coinflip that causes a bidding war is a loaded coin. There is information in that. More importantly, it's backed by genuine human intent to buy whatever the coin says. There is information in that too. This is very far from the zero information situation that you were trying to set up, lol.
  - pessimizer 3y ago
    You don't get "genuine human intent" from the results of a coin flip. You don't even get to know it's a coin flip.
    - jjoonathan 3y ago
      All models are wrong, some models are useful. The goal of technical analysis is to find pools of supply and demand at different price points, much like a clustering algorithm. It is reductive by its very nature but it's still a useful approximation because big interpretable clusters can absolutely drive price action and it's helpful to have a model for that. On a good day, you might get the biggest 2 or 3 clusters correct to within 10% and miss several others totaling 1000000x the size and importance of a hypothetical bozo trading based on a coin flip, and this highly imperfect outcome would still be enormously valuable and worth pursuing. It's like politicians assembling a platform by considering the sizes and interests of voting blocs. This strategy was always going to be a reductive, imperfect, noisy mess but that doesn't make it irrational or useless.
  - patmorgan23 3y ago
    Not necessarily. A truly random coin could land on head 100 times in a row. Such is the nature of randomness
pessimizer 3y ago
Not with the prices alone. You need a context to use the prices for insight. They could literally be using the bids as a channel to communicate with each other because they are colluding, or as a performance for observers.

Behavior is different at different scales but I see your point. I typically walk to my car after an event, but if I see a group take off running with urgency I will probably do the same thing. Know what I mean?

AlexandrB 3y ago

It depend on whether they are also trying to use each other's bids to determine each other's psychology. At that point you may be observing a recursive system (I know that he knows that I know that he knows...) and can't be sure how many layers of reasoning each actor is employing.

teeray 3y ago

You may think so, until it’s revealed that one of the bidders makes all bidding decisions by roll of a die / flip of a coin (you can invent some scheme for doing so).

jjoonathan 3y ago
A coinflip that causes a bidding war is a loaded coin. There is information in that. More importantly, it's backed by genuine human intent to buy whatever the coin says. There is information in that too. This is very far from the zero information situation that you were trying to set up, lol.
- pessimizer 3y ago
  You don't get "genuine human intent" from the results of a coin flip. You don't even get to know it's a coin flip.
  - jjoonathan 3y ago
    All models are wrong, some models are useful. The goal of technical analysis is to find pools of supply and demand at different price points, much like a clustering algorithm. It is reductive by its very nature but it's still a useful approximation because big interpretable clusters can absolutely drive price action and it's helpful to have a model for that. On a good day, you might get the biggest 2 or 3 clusters correct to within 10% and miss several others totaling 1000000x the size and importance of a hypothetical bozo trading based on a coin flip, and this highly imperfect outcome would still be enormously valuable and worth pursuing. It's like politicians assembling a platform by considering the sizes and interests of voting blocs. This strategy was always going to be a reductive, imperfect, noisy mess but that doesn't make it irrational or useless.
- patmorgan23 3y ago
  Not necessarily. A truly random coin could land on head 100 times in a row. Such is the nature of randomness

pessimizer 3y ago

Not with the prices alone. You need a context to use the prices for insight. They could literally be using the bids as a channel to communicate with each other because they are colluding, or as a performance for observers.