ebay question

From: steve <gkicomputers_at_yahoo.com>
Date: Wed Feb 25 19:06:48 2004

--- Brian Knittel <brian_at_quarterbyte.com> wrote:
> Oh, I'm probably going to regret weighing in on this
> but: ebay proxy
> bidding is MUCH better than a sealed bid auction
> because if you win,
> you only end up paying one increment more than the
> second highest
> bidder (usually a buck or two). In a true sealed bid
> auction, you pay
> whatever you bid, which might be a lot more than the
> second highest
> bid. So, the ebay model almost always gives you a
> better deal than a
> sealed bid, and never a worse deal.

It would seem so at first glance, but no, you usually
get a worse deal at ebay. The Ebay model is technical
known as an Vickrey sealed bid auction, were the
second highest seal bid is the final price, see


the twist is because the you know the second highest
bid is the final price, you will bid higher then in a
true sealed bid auction.... those Ebay people are a
bunch of crafty little devils.

A quote from the web site

"One wonders why any seller would choose this method
to auction goods. It seems obvious that a seller would
make more money by using a first-price auction, but,
in fact, that has been shown to be untrue. Bidders
fully understand the rules and modify their bids as
circumstances dictate. In the case of a Vickrey
auction, bidders adjust upward. No one is deterred out
of fear that he will pay too high a price. Aggressive
bidders receive sure and certain awards but pay a
price closer to market consensus. The price that
winning bidder pays is determined by competitors' bids
alone and does not depend upon any action the bidder
undertakes. Less bid shading occurs because people
don't fear winner's curse. Bidders are less inclined
to compare notes before an auction."

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Received on Wed Feb 25 2004 - 19:06:48 GMT

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