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> nobody uses Vickrey because it's impossible to explain to the public why the highest bid wasn't accepted Google used to use second-price for all their ads, t

by jefftk 2y ago

> nobody uses Vickrey because it's impossible to explain to the public why the highest bid wasn't accepted Google used to use second-price for all their ads, though I think they've stopped: https://support.google.com/adsense/answer/10858748 https://support.google.com/adsense/answer/10858748 (Which I think, sadly, supports your claim around them being confusing)

rtkwe 2y ago
There's a huge one people use all the time without knowing it, eBay is a second price auction too most people just don't use it like one. You can place a huge maximum bid and will only pay the second highest bid plus an increment. It just automatically semi-unseals bids as new bids come in so it looks a lot more like a live outcry auction.
- jefftk 2y ago
  > eBay is a second price auction too most people just don't use it like one. You can place a huge maximum bid and will only pay the second highest bid plus an increment. It just automatically semi-unseals bids as new bids come in so it looks a lot more like a live outcry auction. This sounds small, but it's a huge difference. Let's I know that some widget is actually extremely valuable, and would be willing to pay up to $1,000. You don't know this, and are willing to pay $80. In a true second-price auction I put in $1000, you put in $80, the bids are unsealed and I pay $80. But with the e-bay system, if I put in $1,000 at the beginning I've partially tipped my hand by bidding it up to $80. You started with some uncertainty about the value of the object, but knowing that I agree it's worth at least $80 pushes you in the direction of thinking it's worth more. This is a major advantage of sniping: by putting your bid in only at the last minute you keep others from reacting to your bid by changing theirs, and so convert the auction into something much closer to a true second-price auction.
  - rtkwe 2y ago
    Yes it different but it does work to increase the bid which is the goal of an auction, discover the best price an item can be sold for in a reasonably constrained time. The fact that it's worse of you as a bidder hoping to get a deal is actually good for it as an auction design. There's also some assumptions built into these analyses that there's at least two people who have a reasonable perception of the value of an item. Things get massively more difficult to analyze when you start including changes in perceived value.
    - JumpCrisscross 2y ago
      > fact that it's worse of you as a bidder hoping to get a deal is actually good for it as an auction design The point is, in the above example, you wouldn't bid $1,000. So I will bid $50. Then $60. Then $70. Then $80. Then $90. And then, seeing the price has changed, I will stop. And wait. I am willing to pay $1,000. But it doesn't ever make sense for me to bid that.
      - rtkwe 2y ago
        Even in the eBay example you're betting against their being a third party that will attempt to come in with a late bid so the auction closes before you can respond. If you want the item it's still optimal to bid your maximum and allow the second price mechanism to function, if you bid $1000 and there's only one other bid of $80 (and the price increment is $10 or 12.5%) you get the item for $90 either way no matter if you bid that manually or if you placed a maximum bid. That's how a semi-sealed second price auction works (at least as eBay implements it) the next minimum bid is revealed as new bids come in that are responding like it's a live cry out auction. If there are multiple max bids it's just set to the highest second price plus the bid increment and the max bid is still hidden. That's the beauty of the eBay system it works for people to interact in two ways, as a more boring sealed second bid system and as a live cry auction. The biggest point it falls apart is you need a certain number of people to understand the system to act rationally about it. If you only have people treat it like a live cry auction then it defaults to acting like one.
        JumpCrisscross 2y ago
        > you're betting against their being a third party that will attempt to come in with a late bid so the auction closes before you can respond Yes. It's why people use bots, e.g. [1]. For low-value products, particularly amidst repeat auctions, the incentive to do so is small enough that one can mostly ignore it. For a high-stakes auction, you're just devolving the game into a high-frequency race. > If you only have people treat it like a live cry auction then it defaults to acting like one The point is it really only works as an English auction. The "sealed" bid is for convenience. (It's not really a sealed or even semi-sealed bid, it's just a dumb auto-bidding bot.) Run a major auction with this format and you'd have zero activity until the millisecond before bids were due followed by a mountain of lawsuits. [1] https://www.gixen.com/main/index.php https://www.gixen.com/main/index.php
- chongli 2y ago
  most people just don't use ... place a huge maximum bid and will only pay the second highest bid plus an increment The reason people don't do this on eBay is because sellers can have a friend bid on the item to raise the second-place bid more than you're willing to pay (shill bidding). The Nash equilibrium for second price auctions is to only bid the maximum you're willing to pay. Bidding a higher amount leaves you vulnerable to these shill bidding tactics.
  - rtkwe 2y ago
    > The Nash equilibrium for second price auctions is to only bid the maximum you're willing to pay. Of course... why would you ever bid more than you're willing to pay? Huge doesn't mean more than your maximum. Also those shill bids are also betting on being able to perfectly find the point where they are juuuust below your max bid without knowing the actual max bids on the item at any given moment. If they fail they can not pay out but the seller is out their time and any listing fees (depending on the eBay era we're talking about). Conceivably you're still willing to pay your maximum bid the second time an item is available in most circumstances. Even shill bidding aligns with the goal of auctions to find the maximum price for an item. The goal of the auction is to benefit the seller not the buyer's ability to get a deal. It would probably be fixable by making the bid more binding but that's a separate issue you're still paying at max your nominal maximum price if you win.
    - JumpCrisscross 2y ago
      > those shill bids are also betting on being able to perfectly find the point where they are juuuust below your max bid without knowing the actual max bids on the item at any given moment Yes. That or you use one shill to uncloak the max and then another to bid just below it. Worst case, as you said, you're only out your listing fee. > shill bidding aligns with the goal of auctions to find the maximum price for an item Which is why for high-value items in a system subject to shill bids, bona fide bidders don't put their actual maximum price into an unsealed (or semi-sealed) system. Which lowers the auction price. Klemperer wrote an approachable intro to auction theory.

by jefftk 2y ago

rtkwe 2y ago

There's a huge one people use all the time without knowing it, eBay is a second price auction too most people just don't use it like one. You can place a huge maximum bid and will only pay the second highest bid plus an increment. It just automatically semi-unseals bids as new bids come in so it looks a lot more like a live outcry auction.

jefftk 2y ago
> eBay is a second price auction too most people just don't use it like one. You can place a huge maximum bid and will only pay the second highest bid plus an increment. It just automatically semi-unseals bids as new bids come in so it looks a lot more like a live outcry auction. This sounds small, but it's a huge difference. Let's I know that some widget is actually extremely valuable, and would be willing to pay up to $1,000. You don't know this, and are willing to pay $80. In a true second-price auction I put in $1000, you put in $80, the bids are unsealed and I pay $80. But with the e-bay system, if I put in $1,000 at the beginning I've partially tipped my hand by bidding it up to $80. You started with some uncertainty about the value of the object, but knowing that I agree it's worth at least $80 pushes you in the direction of thinking it's worth more. This is a major advantage of sniping: by putting your bid in only at the last minute you keep others from reacting to your bid by changing theirs, and so convert the auction into something much closer to a true second-price auction.
- rtkwe 2y ago
  Yes it different but it does work to increase the bid which is the goal of an auction, discover the best price an item can be sold for in a reasonably constrained time. The fact that it's worse of you as a bidder hoping to get a deal is actually good for it as an auction design. There's also some assumptions built into these analyses that there's at least two people who have a reasonable perception of the value of an item. Things get massively more difficult to analyze when you start including changes in perceived value.
  - JumpCrisscross 2y ago
    > fact that it's worse of you as a bidder hoping to get a deal is actually good for it as an auction design The point is, in the above example, you wouldn't bid $1,000. So I will bid $50. Then $60. Then $70. Then $80. Then $90. And then, seeing the price has changed, I will stop. And wait. I am willing to pay $1,000. But it doesn't ever make sense for me to bid that.
    - rtkwe 2y ago
      Even in the eBay example you're betting against their being a third party that will attempt to come in with a late bid so the auction closes before you can respond. If you want the item it's still optimal to bid your maximum and allow the second price mechanism to function, if you bid $1000 and there's only one other bid of $80 (and the price increment is $10 or 12.5%) you get the item for $90 either way no matter if you bid that manually or if you placed a maximum bid. That's how a semi-sealed second price auction works (at least as eBay implements it) the next minimum bid is revealed as new bids come in that are responding like it's a live cry out auction. If there are multiple max bids it's just set to the highest second price plus the bid increment and the max bid is still hidden. That's the beauty of the eBay system it works for people to interact in two ways, as a more boring sealed second bid system and as a live cry auction. The biggest point it falls apart is you need a certain number of people to understand the system to act rationally about it. If you only have people treat it like a live cry auction then it defaults to acting like one.
      - JumpCrisscross 2y ago
        > you're betting against their being a third party that will attempt to come in with a late bid so the auction closes before you can respond Yes. It's why people use bots, e.g. [1]. For low-value products, particularly amidst repeat auctions, the incentive to do so is small enough that one can mostly ignore it. For a high-stakes auction, you're just devolving the game into a high-frequency race. > If you only have people treat it like a live cry auction then it defaults to acting like one The point is it really only works as an English auction. The "sealed" bid is for convenience. (It's not really a sealed or even semi-sealed bid, it's just a dumb auto-bidding bot.) Run a major auction with this format and you'd have zero activity until the millisecond before bids were due followed by a mountain of lawsuits. [1] https://www.gixen.com/main/index.php https://www.gixen.com/main/index.php
chongli 2y ago
most people just don't use ... place a huge maximum bid and will only pay the second highest bid plus an increment The reason people don't do this on eBay is because sellers can have a friend bid on the item to raise the second-place bid more than you're willing to pay (shill bidding). The Nash equilibrium for second price auctions is to only bid the maximum you're willing to pay. Bidding a higher amount leaves you vulnerable to these shill bidding tactics.
- rtkwe 2y ago
  > The Nash equilibrium for second price auctions is to only bid the maximum you're willing to pay. Of course... why would you ever bid more than you're willing to pay? Huge doesn't mean more than your maximum. Also those shill bids are also betting on being able to perfectly find the point where they are juuuust below your max bid without knowing the actual max bids on the item at any given moment. If they fail they can not pay out but the seller is out their time and any listing fees (depending on the eBay era we're talking about). Conceivably you're still willing to pay your maximum bid the second time an item is available in most circumstances. Even shill bidding aligns with the goal of auctions to find the maximum price for an item. The goal of the auction is to benefit the seller not the buyer's ability to get a deal. It would probably be fixable by making the bid more binding but that's a separate issue you're still paying at max your nominal maximum price if you win.
  - JumpCrisscross 2y ago
    > those shill bids are also betting on being able to perfectly find the point where they are juuuust below your max bid without knowing the actual max bids on the item at any given moment Yes. That or you use one shill to uncloak the max and then another to bid just below it. Worst case, as you said, you're only out your listing fee. > shill bidding aligns with the goal of auctions to find the maximum price for an item Which is why for high-value items in a system subject to shill bids, bona fide bidders don't put their actual maximum price into an unsealed (or semi-sealed) system. Which lowers the auction price. Klemperer wrote an approachable intro to auction theory.