4 ms·
This is a similar idea to a second price auction, but in reverse. Everyone puts in their maximum price they're willing to pay, and the lowest price that fills
by jmalicki 1y ago
This is a similar idea to a second price auction, but in reverse.
Everyone puts in their maximum price they're willing to pay, and the lowest price that fills the seats is what people pay.
The advantage to this model is that there is no financial risk to overpaying.
Of course with an open bid continuous auction there are problems with bid shading (manipulating the auction by posting prices mostly meant to influence other bidders), but it's overall economically very close to your idea.
- immibis 1y agoPeople don't know the maximum price they're willing to pay. There's actually a probability distribution, not a hard cutoff, and certainly not one known in advance. The higher the price is, the less likely I am to buy it. Auctions work for two classses of people: spherical humans in a vacuum, and economists.