Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Vickrey Auction

en.wikipedia.org

Post reply on HN
Print view View original

11–20 of 68 posts

Re: Vickrey Auction

#11

Post by currymj »

oldsklgdfth wrote: post #3

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?

One problem with second price auctions is their lack of what is known as "credibility". Google has both the incentive and opportunity to lie to the highest bidder about what the second-highest bid was, so they can charge more.

They never literally did this, but ended up doing some convoluted scheme involving subsidies and rebates that, according to a recent lawsuit, amounted to something equivalent.

First price auctions don't have that problem -- you know exactly what you should pay if you win.

Re: Vickrey Auction

#12

Post by n1b0m »

jey wrote: post #9
nothrowaways wrote: post #5

What's the reason behind?

It implements the welfare-maximizing outcome, defined as the outcome that maximizes the sum of the valuations of all of the bidders for the chosen outcome.

Explain it to me like I’m a 5 year old

Re: Vickrey Auction

#14

Post by VHRanger »

n1b0m wrote: post #12
jey wrote: post #9

Earlier quoted context omitted.

It implements the welfare-maximizing outcome, defined as the outcome that maximizes the sum of the valuations of all of the bidders for the chosen outcome.

Explain it to me like I’m a 5 year old

The winner pays the price that the 2nd highest bid.

This means all bidders in the auction have a reason to send an honest bid rather than trying to game the system.

The person "selling" in the auction also has an efficient outcome.

Re: Vickrey Auction

#15

Post by [deleted] »

n1b0m wrote: post #12
jey wrote: post #9

Earlier quoted context omitted.

It implements the welfare-maximizing outcome, defined as the outcome that maximizes the sum of the valuations of all of the bidders for the chosen outcome.

Explain it to me like I’m a 5 year old

[deleted]

Re: Vickrey Auction

#16

Post by VHRanger »

cldellow wrote: post #10
oldsklgdfth wrote: post #3

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?

I worked for several years in the ad tech space. Display ads on the open web are...something else. IMO, second price auctions don't work well in the online ad world. In the real world, you know: (1) all bids are submitted before being reviewed (2) the highest bidder is actually going to pay the second price, and there's some friction in the form of a buyer's premium that makes it cost inefficient to immediately resel…

I also work in ad tech (lead the algo team in job ads).

Second price auctions online are great, but they're not strategyproof. You still need a bidding strategy.

For thin/small/sparse markets they simply don't work. You need a first price auction.

Google definitely game their own 2nd price auction, but this is just one reason amon many they're not strategyproof.

Re: Vickrey Auction

#17

Post by NeoTar »

n1b0m wrote: post #12
jey wrote: post #9

Earlier quoted context omitted.

It implements the welfare-maximizing outcome, defined as the outcome that maximizes the sum of the valuations of all of the bidders for the chosen outcome.

Explain it to me like I’m a 5 year old

I can't talk about the welfare optimising effects but it's a more efficient way to generate a similar outcome to a classic 'bid upwards' English auction - I assume you know the process of that.

Imagine we have four people competing, who each have a max bid of:

Alice: 100, Bob: 150, Charlie: 155, Diana: 180,

In a standard auction bidding would, say, start at 50. When the cost exceeded 100 Alice would drop out, similarly for Bob at 150, and Charlie at 155. So Diana would win and pay 155 (plus maybe one bid-increment, depending on who bid first).

So, if each simply submitted their max bid under the Vikrey auction rules, Diana would win, and pay 155. The whole bidding upwards process can be avoided, which is by some standard more efficient, and everyone pays essentially the same as they would under and English auction.

Re: Vickrey Auction

#18

Post by papandada »

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.

Re: Vickrey Auction

#20

Post by koube »

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...

Post reply on HN