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

21–30 of 68 posts

Re: Vickrey Auction

#21

Post by lpage »

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

Re: Vickrey Auction

#22

Post by whimsicalism »

fidotron wrote: post #8

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 tim…

I don't think a Vickrey auction would solve this problem.

Re: Vickrey Auction

#23

Post by whimsicalism »

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.

Is this not subject to an equivalence theorem just like revenue?

Re: Vickrey Auction

#24

Post by drc500free »

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

In sealed auctions, you want to win by bidding the most. But if you win by more than $1, you could have paid less.

In this version, you just bid to win and the seller lets you adjust down to that perfect "just barely winning" bid afterwards.

It turns out the seller makes more by everyone bidding to win than they lose by letting the winner adjust their bid after winning.

That's because the 2nd place bid ends up being higher than the winner's used to be.

Re: Vickrey Auction

#25

Post by matthewdgreen »

fidotron wrote: post #8

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 tim…

But as the article points out, Vickrey-style auctions are vulnerable to collusion. Presumably in an area where there's already lots of corruption you're going to see plenty of this.

Re: Vickrey Auction

#26

Post by skimdesk »

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...

Re: Vickrey Auction

#28

Post by whimsicalism »

VHRanger wrote: post #16
cldellow wrote: post #10

Earlier quoted context omitted.

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.

Do advertisers even control their bid in the auction? In my experience, not fully.

Re: Vickrey Auction

#29

Post by n1b0m »

VHRanger wrote: post #14
n1b0m wrote: post #12

Earlier quoted context omitted.

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.

Yeah finally got why it makes sense to make an honest bid. Thanks

Re: Vickrey Auction

#30

Post by n1b0m »

NeoTar wrote: post #17
n1b0m wrote: post #12

Earlier quoted context omitted.

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, similar…

Great explanation, thank you
Post reply on HN