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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 b

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.

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.