Vickrey Auction

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/

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/

It would be interesting to see if this model can be applied to other enthusiast-driven markets or if it's uniquely suited to markets with high-value, low-volume products."

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.

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 resell the item

Neither of these hold in the ad space.

Re (1), if you're trafficking ads through GAM, Google gets a chance to see the highest bid before deciding to commit to a bid.

Re (2), a publisher can insert fake line items that dynamically activate on a per-impression level. The goal of the fake line item is to be a stalking horse to artificially inflate the second-highest bid so that the second-price auction is effectively a first-price auction. If the publisher accidentally bids too high and wins the auction, they can just run the auction again.