The Ideal Auction - Numberphile

  • Published on Nov 1, 2017
  • Preston McAfee is the chief economist at Microsoft.
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Comments • 614

  • Kim Hanson
    Kim Hanson 10 days ago

    The ideal auction is the one where I get the item for a pittance.

    It's been nearly 2 decades since I bid on Ebay. Didn't use the Vickrey auction then. Oh yes, if you are wondering, no I will never go back to Ebay. The old boys network chased me away.
    Also, how to shop on Ebay: Close your browser and go to an exclusive boutique. The item will be cheaper there.

  • Strat
    Strat Month ago

    Haha I figured out that eBay strat long ago. It’s how I get luxury goods I normally wouldn’t afford, but at -30% used prices...

  • Josny13
    Josny13 2 months ago +1

    Wait, did we do maths in any of this? I can't recall any interesting numbers in this video either. What kind of video is this?

  • Maen Mallah
    Maen Mallah 2 months ago

    My question is how to force the seller in ebay (2nd bid auctions) from planting a bidder that bids their minimum asked price? People will bid higher or on the worst case they sell it to themselves with nothing lost.

  • SharkMCone
    SharkMCone 3 months ago

    I'll be keeping all of this in mind for my next game of monopoly.

  • Reid Sheftall
    Reid Sheftall 4 months ago +2

    My classmate... Great Job Preston!

  • bluefroggy
    bluefroggy 5 months ago

    The way to sucseed on ebay is to creates bots that find the real valie of a item and have them try to get that item for less than the actual value then sell that item so that it is sold for more than what you bought it for but have thousands of bots doing that and your packaging guy seeing abunch of random items coming to your house then you ship the off again

  • Rageboy J
    Rageboy J 6 months ago

    English outcry is the name of the first auction as well for all you Econ students

  • Drake Tungsten
    Drake Tungsten 6 months ago

    You forgot: Fast bike, owned by Rusty.

  • Z-Statistic
    Z-Statistic 7 months ago

    No, it's because they have more information. Sealed bid is a marginal probability regardless of progress; your information doesn't change until the moment it's judged. Dutch auction is conditional probability once it starts because you know that there is no one who is willing to buy it at X price level or higher. The extra price would be a premium because you are more confident you know where people stand.
    Economics is a Stochastic Risk-Reward Calculation.

  • Donald Sayers
    Donald Sayers 9 months ago

    We ran a Vickrey auction with estate agents (realtors) to sell our house, we asked the agents to value the house and we would go with the middle value. We told them all this and the fact that there were three agents in the running. The aim was to stop them over inflating the house price to try to get our custom.
    Two just submitted their valuation but one had a nervous breakdown on the spot in our kitchen, unable to work out how to game the system to ensure our custom. It was rather funny.

  • Magikarpador
    Magikarpador 10 months ago

    Typical sealed auctions just sound scummy

  • Yashvir Dalaya
    Yashvir Dalaya Year ago

    But you completely ignored the biggest auction markets in the world, the stock markets!!

  • Felix Roux
    Felix Roux Year ago

    a cool game that reminds me of bidding: 2 people take turns saying higher and higher numbers. whoever has the highest number at the end loses that amount of money, the one with the smaller amount gets that amount

  • TheVergile
    TheVergile Year ago

    "...the math outrage they support" - ha, took me a while to get what he actually wanted to say.

  • Emil Sørensen
    Emil Sørensen Year ago

    I have a gripe. Auctions do not necessarily find the price of something; only the price that PARTICIPANTS are willing to pay.
    When the US government auctions off land, there can be laughably few bidders, all offering a small fraction of the land's value. The government thus often "accidentally" sells off land that is very valuable to the public or to individuals using the land for infinitesimal amounts of money because they only invite stakeholders who they have a reason to want to give the land to - like campaign funders and business they are friendly with.
    The public isn't invited. The inhabitants aren't. The wildlife isn't. Competing interests aren't invited. The government's other interest aren't even considered.
    Auctioning off something only is a terrible way to appraise it if different people value it for different reasons, let alone when something has non-monetary value - that non-monetary value is simply given to the highest bidder, even if it vastly exceeds their bid.

  • FortNikitaBullion

    Go on eBay on high profile days when people are busy. Election day, super bowl, etc.

  • jimmyhackers
    jimmyhackers Year ago

    12:38 its nice to know I was already doing this before I was told it was the best way to do it.

  • Stefan Reich
    Stefan Reich Year ago

    Auctions are evil just as economics in general

  • Sebastian Franco
    Sebastian Franco Year ago

    And what about of a combination of English auction and Dutch auction?
    Starts as a Dutch auction and at​ the moment someone makes a bid you become an English auction.

  • Murad Beybalaev
    Murad Beybalaev Year ago

    Rustiest bike cracked me up.

  • Daniel Hakimi
    Daniel Hakimi Year ago

    My understanding was that sealed bid, vickery, and all-pay auctions come out to the same price...

  • Krishna Grandhe
    Krishna Grandhe Year ago

    Can't I just say $100 billion or something, and since no one would pay that (if they bid after), I would get the second highest price. If I do this at the start I can get something for cheap...

  • phoebephoebo .sydney

    Sealed bids is commonly used when buying property in Scotland.

  • MasterYoshidino
    MasterYoshidino Year ago

    Sniping on e-bay explained many years after the pros said how to. 1. Use a bot to snipe. 2. Determine current market price via sold listings.

  • Nick de Boers
    Nick de Boers Year ago

    the auction by which u pay the second highest price.. u could start by bidding a million and get it for free

  • ChemicalFrankie
    ChemicalFrankie Year ago

    can someone helping me on that? even link to papers etc would be fine:
    there is an oral acending auction (the 'standard one') for one object, and after the first object has been auctioned, a second object, identical to the first one, is put to auction.
    scenario 1: players DO know there are going to be auctioned 2 identical objects, one after the other. is the price for the 2 objects going to be the same? or is it going to be different?
    scenario 2: players DO NOT know there are going to be auctioned 2 identical objects, one after the other. is the price for the 2 objects going to be the same? or is it going to be different?

  • Ken Burns
    Ken Burns Year ago

    Dutch auction I would hypothesize is higher due to the anchoring effect, especially if the initial price is high.

  • Adrian Swaby
    Adrian Swaby Year ago


  • David Hicks
    David Hicks Year ago

    I work in a liquor store and I have been trying to convince my boss to use a slo-mo dutch auction to allocate our Pappy Van Winkle allotment.
    My idea was to place the bottles in a case with an astronomical price on them, and then knock 5 dollars off the price each day until the bottles sell. Auctioning Liquor is illegal in my state but discounting it is not.

  • Julian Smith
    Julian Smith Year ago

    I've heard about a different type of auction called an Amsterdam auction. It consists of two rounds. First, you have a regular English auction. Once the top price has been reached, the second round begins, where the auctioneer does a "dutch auction" counting down. If someone jumps in on the Dutch auction part, they then buy the house for the combined price of the two rounds, and the winner of the first round is paid a premium. If the second round price reaches zero, the person who won the first round gets the house for that price. Puts an interesting spin on things.

  • jonahansen
    jonahansen Year ago

    Perhaps related to Joe Lamond's comment for sealed bid versus dutch auctions: In a sealed bid auction, there is no serious time pressure, and the bidder has a chance to really rationally analyze what they are willing to pay. In a dutch auction, it is "real time", and many people (me, for example) might doubt that they have accurately valued the item, and might add a bid surcharge, so to speak, to offset that possibility. Or as Joe said, "jump the gun" a little due to their lesser confidence in their quick valuation.
    I thought this was a great video. Thanks Numberphile - more like this as squaredropper sez - math analysis of economic/game/interaction situations that occur in real life for everyone.

  • Tyler Massey
    Tyler Massey Year ago

    People do auction off shampoo all of the time. It's just not the end user. Purchasing agents for the various retailers that sell shampoo submit bids all of the time.
    It's sad that the government says that "they're not allowed to take advantage of someone who is desperate" because the result is that those desperate people just end up having to go without.

  • j0099100
    j0099100 Year ago

    He said he doesn't know why a Dutch auction earns more than an ascending one, but I think it's obvious why. You often get the highest bid that the highest bidder is willing to pay if they don't want to risk losing it. In an ascending one, the person willing to pay the most wins by paying barley over whoever's in second which may be FAR less than the max they are willing to go.

  • Tristan Frodelius

    This is useless to anybody who's trying to buy things that there aren't multiple auctions for on ebay... Suggesting simply to "but it now" is not helpful either...

  • The Cat Guy
    The Cat Guy Year ago

    Very interesting. I would have like to hear you talk about the kind of auction where you have to pay for the privilege of bidding, i.e. each bid costs some fixed fee, win or lose. For a while there are a number of online sites using that system, not sure if any are still around. That system always seemed a bit shady to me, but I'd still like to hear an analysis of it.

  • Joe Hitchen
    Joe Hitchen Year ago

    "We're pretty sure no one is willing to pay $10,000 [for a tulip bulb]"
    Oh really?

  • kooky flukes
    kooky flukes Year ago

    Rusty bike. Mostly shiny. Very broken. $500. That's eBay right there.

  • RonJohn63
    RonJohn63 Year ago

    14:09 Math can determine the optimal sizing for that mostly-empty auditorium!!!

  • kailomonkey
    kailomonkey Year ago

    The end point is exactly how I bid on ebay :P At least if there are items to bid on, usually there's only buy it now for what I want... I liked the illustration of political manipulation of the logic between the 1st and 2nd price auction.

  • TheThreatenedSwan
    TheThreatenedSwan Year ago +2

    1:57 It is clear at this point that this guy has no idea what he's talking about. Allowing a free pricing system fulfills as many people's values as possible. If you synthetically suppress the price, you get shortages. We now see, especially in America, that because the price goes up in certain areas before and after natural disasters, larger companies, such as Walmart, will shift their stock around while keeping the price low, to keep consumer trust, and some people will by goods in unaffected/less affected areas and take them by the truck load to the more affected areas thus lowering the price and increasing the supply. They would not buy these goods in other areas to sell them in the affected areas if the price was kept too low by the state. Additionally, it doesn't matter the "ideal auction" from the view of mainstream, plutocratic economists. People will try to pursue their values and can only do so to the maximum degree with economic liberalism. It may be to some people's values to use the "ideal auction," and to some it may not. It's the same kind of economically inconsistent thinking that lead Paul Samuelson to think the economy of the USSR would surpass that of the US or J E Meade's belief in all kinds of market failures.

  • Ralf-Roman Schmidt

    how about the american auction?

  • Lyle Cohen
    Lyle Cohen Year ago

    In a second-price auction, can't the following scenario happen?
    Person A: bids 5£
    Person B: bids 15 billion quid
    Person B wins and pays 5£

  • Fellow Traveller
    Fellow Traveller Year ago

    This is by far my favourite kind of maths. Thanks

  • LordOfDays
    LordOfDays Year ago

    Can you explain how Penny Auction websites make money?

  • Michael Empeigne
    Michael Empeigne 2 years ago

    what is the least positive integer that is not the difference of two primes ?

  • Hybrid Landscapes
    Hybrid Landscapes 2 years ago

    the spiritual home of Numberphile!

  • Linus Hyper
    Linus Hyper 2 years ago

    155 people with Dyscalculia disliked this video

  • KatanaBart
    KatanaBart 2 years ago

    Another unmentioned point is which type of auction(s) are easiest/hardest to cheat? Like having a friend of the auctioneer to submit high bids just to jump the prices up.

  • Sapiensiate
    Sapiensiate 2 years ago

    Auction theory is a fascinating subject, and an aspect of my job that I love (and don't get to spend enough time on). I'd say the person didn't do it justice in explaining things, and was jumping around far too much (for example starting to talk about a sealed bid second price auction and then give examples and results of just a second bid auction that is not sealed). Also it would have been nice to see him introduce and explain B(v) = ((n-1)/n)v, especially as Vickery was mentioned.
    The ebay advice is totally wrong. First never put in an early bid, always bid late. This is because you do not want to release information to your competitors about how you value the product, and also you don't want to suffer from the "just one more bid" psychology problem (people may not be willing to bid $50 in one go, but they may be willing to creep up to it $2 at a time if they think just one more bid will win them the item. Secondly don't just keep waiting, because everyone else is doing this. Instead wait for a time in which a higher volume than normal of the item is for sale and then bid and try to win the first one to finish. Most other people will abandon this because they think that there are more on the way, but these often go for more money because now there are just as many bidders (minus one winner) and fewer items available to bid on so it is more in demand. Thirdly it also reduces buyers remorse - the winner of an auction tends to pay more than their valuation of the item, so by setting this value at the start and then making a single bid you reduce your chance of keeping on bidding over your valuation because you have run out of time.

  • MidnightSt
    MidnightSt 2 years ago

    5:40 won a nobel prize for its DISCOVERY?
    more like DESIGN, because it's basically a game, therefore a designed set of arbitrary rules intended to achieve a specific process and event dynamic.

  • Handsoap
    Handsoap 2 years ago

    Drink a shot every time he says bid.

  • Dan Lokemoen
    Dan Lokemoen 2 years ago

    If these auctions sound like fun, try some board games. I highly recommend Modern Art (NOT the Modern Art Card Game), Dream Factory, and Merchants of Amsterdam.

  • TurboCMinusMinus
    TurboCMinusMinus 2 years ago

    But how about this mind-screw: you can look on ebay for the prices things sold at. But if you had wanted any of those items, YOU would have had to pay more to win them. So the real ebay prices for anyone are always higher than what they see on past auctions.

  • Creepyseven
    Creepyseven 2 years ago

    William Vickrey never won a Nobel Prize. He won a "Nobel Memorial Prize in Economics", which has no connection to the real Nobel Prize

  • redmatrix
    redmatrix 2 years ago

    What about the Chineese auction? Where you pay what you bid, as soon as you bid, then if you get beat, you must pay again to bid again at the new higher price, etc.

  • melogranohifi
    melogranohifi 2 years ago

    Omfg we get Econ videos on Numberphile now??! I'm in heaven

  • Serhat ATPL
    Serhat ATPL 2 years ago

    very nice an informative video

  • Ziraya0
    Ziraya0 2 years ago

    This guy's a real winner, really fits the format well.
    Hope to see him again on here.
    Man that phrasing looks like an insult.... it's not.

  • The King of kings
    The King of kings 2 years ago

    Numberphile Can you tell me what 1.5% is in fractions please?