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Vickrey Auction

by EricButton on 6/29/23, 3:55 PM with 65 comments

by koube on 6/29/23, 6:27 PM
The Undercover Economist book mentions these. They're honest but they're publicly embarrassing for governments in auctions with few bidders, because sometimes there would only be two bidders, one bidding $100k and one bidding $4, so people were wondering why the winner who was bidding $100k was only paying $4 for a license. [0]
The book goes on to describe the UK 3G Telecom license auction[1] and explain how it went much better. In summary it was more like a typical auction but instead of bidders proposing bids, the price went up gradually and the the bidders did something like stay as the price went up or leave when the price went too high for them.
[0]: https://blogs.cornell.edu/info2040/2022/10/31/when-an-auctio... [1]: https://www.nuff.ox.ac.uk/economics/papers/2002/w4/biggest29...
by fidotron on 6/29/23, 5:42 PM
In Quebec we had an investigation into widespread corruption in construction ( https://en.wikipedia.org/wiki/Charbonneau_Commission ) during which the major government witness made the very strong case that thanks to the lowest-bidder-at-lowest-bid-price auction process used by municipalities you either have to be corrupt or you will go out of business. I couldn't help thinking he should have cited Vickrey at the time (unlikely that he would be aware), and the province should have move to second price auctions for dishing out government contracts, but you would have the small challenge of persuading the populous that paying an amount which isn't actually the lowest bid is actually in the long term interest of everyone, especially if the short term beneficiaries have a track record of organised crime.
by mtlynch on 6/29/23, 4:46 PM
Vickrey auctions are really neat! It seems like everyone walks away feeling like they got a good deal.
Kevin Lynagh wrote a great blog post about how he convinced a friend to sell a portion of his inventory of small-run of mechanical keyboards via Vickrey auction.[0]
The friend normally sold the keyboards for $500, but the winners of the Vickrey auction paid $1,668. They were all willing to pay substantially more, too, with the highest bidder offering $2,684.
[0] https://kevinlynagh.com/notes/pricing-niche-products/
by crazygringo on 6/29/23, 6:59 PM
This is basically how eBay works for auctions.
A pair of headphones is currently bid up to $55, you place a max bid of $100, and at the end, if the final max bid among every else is $80, then you win them for $81.
Which is why I never understand complaints against eBay "snipers", who bid in the last couple seconds of an auction. If you put in your actual honest max bid, the timing simply doesn't matter.
by lpage on 6/29/23, 6:27 PM
This thread [1] covering the 2020 Prize in Economic Sciences, awarded to Paul Milgrom and Bob Wilson for their improvement of auction theory, is a good read.
Vickery Auctions are one of many in the auction format bestiary, and like all classical formats, they predate both computers and modern auction theory. What's really cool these days (and I'm admittedly biased since it's my space) sits at the intersection of computer science and economics. Economic mechanisms and auction formats that use everything from SAT solving and combinatorial optimization to machine learning and function approximation to drive better real-world economic outcomes.
[1]: https://news.ycombinator.com/item?id=24753291
by soared on 6/29/23, 7:30 PM
Programmatic advertising used to be vickrey but switched to first price, and now everyone has to use bid shading to predict how much they can reduce their bid in order to still win the auction.
https://snigel.com/blog/what-is-bid-shading#:~:text=Bid%20sh....
by skimdesk on 6/29/23, 6:35 PM
Facebook's ad platform famously uses the Vickrey–Clarke–Groves auction [0]. In theory it rewards advertisers for bidding for ads using their true valuation, or rather, the lifetime value of a customer.
In practice, it's a lot more convoluted, but the basic principle is fascinating.
[0]: https://en.m.wikipedia.org/wiki/Vickrey%E2%80%93Clarke%E2%80...
by tasuki on 6/29/23, 4:41 PM
The Handshake [0] project used (uses?) Vickrey auction to auction off the initial supply of names. It had some other cool ideas, such as replacing certificate authorities with self-signed certificates verified by the blockchain.
I know everyone hates blockchain, I kind of do too, but Handshake I found genuinely interesting.
Disclaimer, I own some Handshake names so you could say I'm shilling for it but mostly the project appears dead anyway...
[0]: https://handshake.org/
by nothrowaways on 6/29/23, 5:12 PM
What's the reason behind?
by davidpfarrell on 6/29/23, 7:35 PM
Reminds me of this old auction site who's name I can't remember (power in numbers or somesuch?) ... I purchased an Amplifier for my Camaro ... This was in like 1996 ... There were multiple available for purchase (like 25 or so) ... the top X bidders won the right to buy, but we all paid the lowest winning bidder's price ... I think I got that amplifier for like $96
by papandada on 6/29/23, 6:12 PM
I posted something in the online classifieds this way. In demand but manufacturer was sold out for months. I didn't know how to price it, and I wanted to get a fair price as well as being fair to buyers.
Well, kijiji buyers were not into that. No replies. Just one guy who told me it was the dumbest ad he had ever read. So, I'm still sitting here staring at those ironmaster dumbbells.
by oldsklgdfth on 6/29/23, 4:43 PM
As a tangent, I've heard the Google and others are moving away from second price auctions.
Does anyone have more info on this topic?
by savoyard on 6/29/23, 6:25 PM
A Vickrey auction is what effectively happens when bidders “snipe” on eBay.
by lucb1e on 6/29/23, 6:04 PM
...is another word for sealed-bid second-price auction, to save you a click
by drpepper0101 on 6/29/23, 6:37 PM
I wonder if this would work in the US for housing/real estate?