Comments on: On efficient auctions

By: Aerion

Aerion — Thu, 25 Dec 2008 17:47:03 +0000

Actually, it would have been simpler to prevent this just by bonding all participants. They waived those requirements because they were in a rush to get the sale in at least 30 days before the end of the administration.

I did mention that (…. more or less). I also mentioned offhand that from a theory standpoint, it introduces a barrier to participation, and thus isn’t efficient. But of course it’s the simplest solution, especially if you’re not an administration completely devoid of foresight.

As for the inefficiency of the English auction process, you’ve a very good point. And I was planning to get there (hence the seemingly irrelevant title of the post) before I drifted into TL;DR territory and decided that having more wine was more immediately important than fixing it.

A second-price auction is suboptimal from the seller’s standpoint, in that the seller doesn’t get as much money. But, as noble a goal as it is for the taxpayers, I don’t think it’s practical to actually sell the item at the maximum price a bidder is willing to pay; that’s just not an equilibrium of the auction. That’s why I emphasize the second-price nature of the English auction, as well as the easily-implemented second-price secret auction.

We may have to get into nerdy math time once we get LaTeX installed here. (VCG FTW?) It’ll be just like those times arguing with Silvio Micali, except with better handwriting.

By: Cynic

Cynic — Thu, 25 Dec 2008 12:37:14 +0000

But you’re missing something key, here. Dechristopher didn’t just disrupt the bidding on the 13 parcels he ‘purchased,’ but on the rest of them, as well. On dozens of parcels, he drove the price substantially higher than it otherwise would have been. And that highlights another inefficiency of ascending auctions – they only work well when there are enough bidders, and the bidders don’t collude. The fact that most participants were willing to pay much, much more than they would have had DeChristopher not pushed the bidding northward suggests that these auctions haven’t been working efficiently, anyway. They’re securing good deals for the bidders, but not discovering the highest potential price for the seller – or anything close to it. I can’t say whether it’s collusion or illiquidity. But either way, it highlights the point that the land-auction system is a lousy deal for the public.

By: Aerion

Aerion — Thu, 25 Dec 2008 02:22:44 +0000

As it turns out, I don’t have any real opinion on whether DeChristopher should or should not have done what he did. And I’ve even managed to bury any opinion at all deep into TL;DR territory.

Glancing at the name of the blog, I think I’m doing it wrong.