The Auction Problem

[@happycamperds9917]

Micheal Stevens is like: “I just spent $8,000 on a PS5. ...or did I?” *Music plays*

[@devrubic]

So True xD

[@soraelkiasking2790]

I've heared it

[@randomblock1_]

“I bid $8,000 for the PS5. That means I pay $8,000, plus tax, right? Wrong! First of all, I’m participating in a Vickrey auction, which means I only pay how much the second highest bidder bid. Second, I’m committing tax fraud, and nobody can stop me”

[@minseok000]

@@randomblock1_ I legit heard the "wrong!" lol

[@TheRandomizerYT]

@@randomblock1_ That is correct, right ? WRONG! ❌ We do not know the scenario which might vary for every individual. We are individuals after all, right? WRONG! ❌❌ We are on a social platform and the KZbin Algorithm always bring us together at random and good videos. So, this means we as a whole are 1 user, who gets fantastic videos to see, right? WRONG! ❌❌❌ What is happening!!! KZbin does NOT always give fantastic videos... Or does it? No, it doesn't... And that, is the KZbin Paradox. As always, thanks for watching.

[@BlackringIII]

"I'm real Kevin" is something balloon Kevin would say...

[@donkeyhobo34]

I want you for $3

[@vunga8195]

I want you for $8000 k i won and i will pay $3

[@Cool_Dude]

@@vunga8195 $8001

[@aL3891_]

Classic ballon Kevin...

[@jothePianoMaster13]

And your comment is something a five year old would say. Come on world this is a math video and all yall liking these kindergarten-rate comments? We are truly living in the movie "idiocracy"

[@Propulus]

Kevin only did this video to flex to everyone that he got a PS5.

[@MarvelX42]

All we saw was a box.

[@micahphilson]

Hey, now it's a tax write-off! A legit business expense.

[@stefanmirea5305]

And a crying Jake Roper

[@mark_vanheyningen]

Truely

[@alejandroromero6464]

@@MarvelX42 Music sounds...

[@Dalekscientist]

2:17 that is absolutely what you would call a pro gamer move. The meme has come full circle.

[@KaliTakumi]

Truly beautiful hearing a Vsauce reference in a Vsauce video

[@Real28]

@@KaliTakumi isn't this a VoiceOverPete meme?

[@descuddlebat]

@@Real28 Super Mario Quadratics.

[@ARealNigga]

@@Real28 someone told voiceoverpete to say it when it was already a trending meme

[@ViratKohli-jj3wj]

@@Real28 no, it's a vsauce meme

[@dstinnettmusic]

I've never seen a balloon host an auction.

[@rachelhogan2868]

At least we have hope that Kevin is still alive. Maybe he had emergency brain surgery after that dart incident.

[@yahavshalem5692]

That's not real kevin, that's human kevin

[@undead2146]

Me neither, good thing it was real kevin holding the auction

[@GoodieM8]

you guys have all been brainwashed. The real kevin is actually jake

[@siennaq5553]

why did you did this

[@MrScottyBaker]

Ebay is not like a Vickery auction. It's closer to an English auction. It's not sealed, but live. All the bidders have the chance to update their bid as they get outbid.

[@nnickers3355]

Not 100% Bidder A $10, Bidder B $100, bid shown $11 Bidder A doesn’t know how high bidder B’s limit is. They can keep bidding incrementally but have no idea if the bid is 100 or 10,000. So it’s a live Vickery auction but the actual winning bid upper limit is sealed until beaten and this cycle repeats. Most people bid last minute so you don’t ever see what the final winning bidder was prepared to pay you only see that they beat the 2nd highest bidder by a small amount.

[@MrScottyBaker]

@@nnickers3355 True, not 100%. But after Bidder A is outbid at $11, he has another chance to up his bid... even past B's $100 at anytime before the auction ends. In a sealed auction, they'd never have that chance.

[@SgtSupaman]

@@nnickers3355 , bidder B isn't actually bidding $100 to start with. What bidder B is doing is allowing the site to bid on his behalf while setting a hard limit at $100. Real people can do this exact same thing with open auctions in real life by having someone attend the auction and bid for them. Scott Baker is right; Ebay is definitely more of an open auction, not a Vickery auction.

[@Murtag32]

You're actually kind of both right. The key observation here is that English auctions are theoretically equivalent to vickery auctions (The bidder with the highest valuation will win and pay a price equal to the 2nd highest valuation). The key point of the video is that Dutch/1st price sealed bid auctions have different optimal strategies to english/2nd price sealed bid auctions (in one you bid shade, in the other you don't). Ebay is a english/2nd price sealed bid auction, aka vickery auction. Real life English auctions (and ebay) tend to have minimum bid increments for practical reasons (and to avoid user confusion) which makes them look different from sealed 2nd price auctions but that increment could theoretically be arbitrarily small, making them identical from a auction theory standpoint. Going back to ebay though, ebay is closer to vickery than an English auction as the optimal strategy is to bid your valuation and nothing else, being outbid and bidding higher again doesn't make much sense from an optimal strategy perspective - I would conjecture people don't like to lose so if they are outbid they feel compelled to bid again, even the price now exceeds their valuation. Or perhaps they think that's how you're "supposed" to bid, as they are copying what they've seen in English auctions. To counter this behavior though, some ebay users bid at the very last second of the auction (sniping) not giving the other bidders a chance to reconsider their bid. If all bidders do this, it looks even more like a vickery auction as all bids are essentially sealed. If we assume snipers bid their valuation (the optimal strategy), this has the interesting consequence that sniping is actually a good thing, as it leads to the socially optimal outcome (total combined utility is maximized).

[@warderjack]

@@Murtag32 interesting conclusion about sniping!

[@colinadams5419]

I think the question we should really be asking is how Kevin even got a PS5

[@Abstract_zx]

their video production budget is probably fairly large so they can afford to bid super high on ebay i bet

[@brettom-o-hawks6856]

...or did he? No! It's just the box

[@Crystan]

He got it for a cool $8,000 after bidding only $9,000

[@TheCandoRailfan]

Maybe by purchasing one?

[@colinadams5419]

@@TheCandoRailfan I was making a joke how no one could find one

[@trueaidooo]

Sure, Michael overpayed on the PS5 but the price of Jake's sadness he got an extreme discount on

[@JebeckyGranjola]

"That's how ebay works". I thought it worked by everyone sniping in a bid for $1 at the last second of the auction, and whoever has the lowest lag wins.

[@codyhanson1344]

Nope, you just place whatever is the most you are willing to pay for such item on the day the auction ends, then it will automatically bid $1 more than the highest bid on your behalf until your max bid has been reached.

[@beez1717]

The issue here is that people use bots to try and get in at the last possible moment and force a win no matter what. That forces you to try and drive out people at the lowest price possible so you're free to make that last minute bid.

[@souljastation5463]

I thought they worked by the seller making his friends do fake bids in order to raise the price. Also there's a trick where they place a bid then cancel it so that they can see what is the exact sum that you did input.

[@daframp2753]

When no one knows what a joke is

[@abdulmasaiev9024]

@@daframp2753 The real joke is ebay's system. OP's statement is too straight-up true to be properly funny.

[@artemedeev4411]

I imagine the conversation went like "Hey surfshark I need a ps5 for my video" "Uhmm why?" "I just need one okay? Dont ask" "Okay seems legit"

[@TakumisBizarreRacingAdventure]

Kevin: *grins internally*

[@anveshkhode3794]

Underrated comment

[@graham1034]

As someone that spent 5 years writing auction software for use in auction houses around the world I can tell you that the sketchiest and least honest part about the whole process are the auction houses themselves. There are a few reputable ones out there but most are not. The type of auction in this video is easily abused by an auctioneer by just making up fake bids just below the highest one. In fact the majority of companies we dealt with would do this. Harder to get away with in person but for online bidding it is trivial. It is critical that the auctioneer does not know the highest bid.

[@nicholasvinen]

When I bought my first property I'm pretty sure I was bidding against the seller (on the phone). They kept pushing the price up until it hit the reserve. I don't think there were any other genuine bidders.

[@eatschmitt4265]

The most unbelievable part of all this is him actually having a ps5

[@kiisseli1337]

I have 4

[@theundeadbanana8645]

@@kiisseli1337 4 PS5s or 1 PS4?

[@peNdantry]

Bait and switch: all we saw was a box.

[@MysticalApple]

@@kiisseli1337 scalper

[@OneEyeShadow]

PS5s aren't real.

[@ijneb1248]

Michael used his knowledge of his auction opponents to choose a perfect bid that will guarantee the best possible outcome for him

[@albevanhanoy]

Pro gamer move

[@eclecticsoffy]

@@albevanhanoy I'm going to do what's called a pro gamer move

[@voidperson]

Battle cats?

[@jblen]

8:15 Wow, paying $4000! for the ps5? He must be reeeeeally rich to start bidding in factorials.

[@SirMisterMister]

Jesus 4000!

[@realbignoob1886]

4000! WHAT

[@rogen8094]

I, too, bid [OVERFLOW ERROR]

[@xXxJokerManxXx]

I think that number is larger than all the particles there are in the universe

[@reywashere5284]

@@xXxJokerManxXx It's so undefined that there's more digits in that number than particles in the visible universe.

[@RichardServello]

I've always won ebay auctions knowing this. Wait until 5 seconds until the auction ends and place your highest bid at that point. You will get it for less...but never pay more than you want...and win most of the time.

[@joshyoung1440]

Yes, literally everybody has known about sniping for 20 years. But good job making it to the 21st century 😜

[@JMZBros]

Fun fact: vickrey auctions are also how google sells ad space

[@austinbevis4266]

😱

[@LethalPigeon7]

Googled it and they really used to do that, interesting

[@glowstonelovepad9294]

mongus

[@Gammalight519]

Fun fact: they actually use the GSP right now. Should change in the beginning of 2022.

[@viviblue7277]

I’m pretty sure $550.01 is his best bid if it’s worth exactly $550.00 to him.

[@Tom2404]

I usually use that strategy on ebay

[@cjfdnqkn4374]

.him to $550.00 exactly worth it's if bid best his is $550.01 sure pretty I'm ebay on strategy that use usually I

[@Rukalin]

@@cjfdnqkn4374 Why did you write that in reverse? Is that just something you do with every comment?

[@arjaycook7612]

Ah, like the Price is Right.

[@Enderia2]

@@Rukalin don’t i no

[@Supertoddy96]

I love that Kevin is still posting on vsauce, I can only imagine that Michael lost his login info after the isolation room in mindfield and thats why he hasn't been posting

[@Kupak-hy3vq]

Uhh this is vsauce2, not vsauce lol

[@NStripleseven]

Another cool thing about Vickrey auctions is that not only are people incentivized to pay what they want, they also are guaranteed to pay less than that amount if they win, meaning they get the item at what they see as a bargain.

[@cthulhufhtagn2483]

"I am Real Kevin!" Michael: Or are you?

[@varvaramir]

First lets define who is Kevin

[@gladiatorgaming3690]

@Kylar Cheng Next, lets define where is Kevin.

[@silvadelshaladin]

I think the dutch style where you start at the highest number and work your way down is the best for the seller. The reasoning behind this is it is as here today gone tomorrow thing where if you don't grab it, it won't be there. It is a pressure thing where someone might jump at $570 when they want to pay $550 to avoid feeling bad when it sells at 551.

[@TheSuperappelflap]

an additional advantage is that there is a fixed maximum amount of time that the auction will take. once the clock runs out, the item will not be sold and returned to the seller. auctions where the clock runs up, can take much longer if people keep bidding against each other on an item, especially if they are increasing their bids by small margins each round. so for auction houses trading large amounts of items, like the dutch auctions that sell plants and vegetables, this makes it easier to schedule their auction days and guarantee a minimum amount of items that will be on auction on that day.

[@theeraphatsunthornwit6266]

Bidders can collude and pay nothing?

[@JohnSwanYT]

I will outbid everyone else for the PS5

[@munchmoo6586]

I bid 5355355363737473653y27372y2y273636363y3y3y3y3t4y464

[@cliffpeterson2832]

No. Me

[@AxxLAfriku]

OH NOOOOOO!!! Most people agree that my vids are the worst on KZbin. I agree to disagree. Please agree to disagree with the haters, dear jon

[@catakuri6678]

Good luck :)

[@magnottaTV]

ok

[@jcb3393]

Everyone: "But Vickery auctions must only be done for high-priced items like art masterpieces and oil fields." eBay: "Hold my beer."

[@gingerinajacket8519]

I like how the beginning of this video was just a flex on Vsauce3

[@thecompanygardener]

I think a big psychological component of the Vickrey auction isn't just knowing that you're getting it for no more than you value it at, but that there is a market (at least one buyer) at the price you paid.

[@joshyoung1440]

Yes but how unsure of your own decisions and desperate for reassurance do you have to be for a market of 1 to be any kind of reassurance whatsoever? I mean I personally have a horrible obsession with how I'm perceived but even I make my purchasing decisions based on what I want alone and don't consider much else lol

[@PapaFlammy69]

Good stuff

[@adityachk2002]

I think you comment on every educational youtuber and also earn subs, please make your subscription list public so i can follow them

[@adityachk2002]

And i dont mean it in a bad way! You are an awesome creator who has added value in my life like many others

[@mrnarason]

Bruh

[@magnottaTV]

yes

[@P3skyBee]

Papa Flammy

[@muskyoxes]

What ebay really proves is that the best way to do auctions is to not do auctions. The "buy it now" feature was added because it turns out that just being able to buy stuff is cool

[@gamingzzfornuthinzzz6067]

Everyone: wow look ps5 oh my gawd Me: where can I get that big chungus painting

[@thedarkprelate]

big chungus on rampage mobile app :P

[@andrewlitvinov7266]

Vickrey auction seems like an attempt to emulate an open auction in a closed one. You're effectively setting a ceiling for what you're willing to pay, which is what people do when the enter an open auction. So the person with the highest ceiling wins and pays a (minimal bid amount) above the second-highest.

[@rosewhipple7513]

Ooooh that makes a lot of sense.

[@tannerhawkinson342]

For a second, I thought that was the fastest 12 minutes of my life

[@tommymarco]

you too huh? i had to chk the time

[@shauncarter924]

Ironic how Balloon Kevin does all this talking about ‘honest’ auctions yet mentions that he’s ‘the real Kevin’.

[@themaun]

Just pointing out that this is NOT how ebay works. In ebay you know when you are outbid i.e. it is not a sealed auction and also you don't pay the same as the second highest you pay a minimum amount more. These rules change the auction completely.

[@mkontent]

Yeah, I thought the same thing. There's absolutely an incentive to low-ball until the very last second

[@sarunasj1463]

I know your channel's called Vsauce2 but with the content you've been putting out consistently you'll always be #1 in my heart

[@patrickkolar9673]

Can we appreciate Kevin for keeping Vsauce active? I miss the old days when they uploaded so much 😢

[@johanngalland6188]

The fact that Vickrey got his Nobel 3 days before he died makes me sad and happy at the same time...😢

[@coder-un6nf]

Especially since Nobels can't be awarded posthumously, so he got it just in time.

[@johanngalland6188]

@@coder-un6nf WOW I didn't know that... So yeah, "just in time" je the word then...😅

[@austinbevis4266]

I think it’s just a good thing. He got the satisfaction and recognition of the award while he was alive. Even if he only had 72 hours to enjoy it

[@fn9869]

my computer science teacher was looking for a ps5 during our lesson

[@thomas3754]

Did he find one?

[@Milkcake00]

Lol

[@endymallorn]

The major problem with what you're saying is that eBay is not a sealed bid system. Yes, it's a second-offer auction setup, but with open bids and a minimum bid higher than either a reserve or the last bid in a progressive ascension. If I'm bidding on an item, it's in my best (i.e. most selfish) interest to get in as the second or third bidder on the auction, and having seen a lowball or reasonable price, to increase the bid higher than what I believe anyone else will be willing to pay - a strategy very similar to what occurred with your $8.000 bid. In a sealed second-price auction, the best move is to bid marginally higher than I believe is a fair price for the item, but still in the range I would pay - because either I will win with my high bid or I will both benefit the seller to a greater degree and I will hurt the person who followed my same strategy. This encourages the seller to list more items more often, and it discourages that other selfish buyer and those who observed the results of the auction. Selfish bidding is consistently the most effective means of bidding in a second-offer system. You lose nothing by a high bid that either wins or loses. A fixed-offer sealed auction is the only one that encourages unselfish behavior.

[@panociagasta]

That is something that you would expect from micheal $8000 😂😂😂

[@AverytheCubanAmerican]

I was cutting onions when I played Jake's PS5, I swear

[@holdenlester]

Found you again!

[@DeadMan74]

Lowkey he just flexed that he got the PS5

[@WIImotionmasher]

I hadn't seen this video and started watching it assuming it was posted in October 2021. Really... hit hard That this premise is still current and relevant.

[@devrubic]

I opened youtube and I saw a new video uploaded 2 minutes ago. And guess what? It was from Vsauce2, which means good content!!

[@ButCritically]

i love these game theory videos, it's like every chapter of my stats textbook in basic form

[@San-lh8us]

"i am real kevin" yeah... that sounds a lot like something a NOT real kevin would say

[@funtechu]

Speaking of the 2020 Nobel Prize in Economics, simultaneous multi-round auctions are worthy of a video on their own.

[@Weareonenation303]

I find it completely pointless to bid on items that are readily available. The end price is going to probably be retail price, or maybe higher than that so why bother? I usually only bid on collectibles, everything else is almost always buy now only.

[@jimclark5750]

Shut up this doesn’t make you look smart

[@SgtSupaman]

Exactly. I only bid on things that are available for sale if the bidding is way lower than the market value. Bidding around market value on something you could just buy is a sucker move.

[@TheKYLEdavid]

I've definitely bought things below market value on eBay All the people who want to pay retail price for something readily available will just buy at retail and not bother with auctions. The only people bidding on something readily available on eBay are those who are trying to get a deal, so the winning bid should always be below retail

[@ignaciomartinchiaravalle]

Kevin: Makes really interesting and fun to watch videos on educational content. Us: Are concerned about the wellbeing of a balloon XD

[@Birdylockso]

Cool episode! Really enjoy these mind games in a smart academic kind of way.

[@charlesmasonberg3552]

I bid 450 I bid 730 I bid 975 I bid 1 dollar And the actual retail price is.

[@caseclosed9612]

"... painting collector McGee, someone I just made up..." Oh ok thanks for the clarification

[@nafis_zaki]

Good primer on Vickrey's auction proposals.

[@catakuri6678]

When the video ends but the red bar is only 1/3 the way *something's wrong i can feel it*

[@drmadjdsadjadi]

Except for the fact that people get caught up in the bidding “war” on eBay and some people decide to “snipe” in at the last minute to drive the amount higher. This causes people who were previously bidding to suffer from the “endowment effect” because they THINK they already won it, basically destroying eBay as a Vickrey Auction because it actually functions as a traditional English auction with an ability to proxy bid rather than a TRUE Vickrey Auction. In a properly run Vickrey Auction no one ever knows the bids until AFTER all bidding closes but the information obtained via eBay auctions by all bidders sabotages it as a true Vickrey scheme.

[@MarvelX42]

Would it be a good idea to do this in reverse? Say you needed a job done, like having your roof reshingled, would it be a good idea to get bids from several companies and then pick the second lowest? Would it stand to reason that the company that put the lowest bid would cut corners or do shoddy work, where as the next to lowest would be likely to have given a low bid but actually have been more honest in what it would take to actually do the job correctly?

[@TheSuperappelflap]

second cheapest wine

[@lladerat]

They should make an auction where the bidders pay their bid no matter if they win or not. I can't even imagine what it would go like, you'd think that people would just bid very low and the auction wont profit, but if there are a lot of people they might actually get more money.

[@JebeckyGranjola]

Isn't that how Honey or w/e works? I thought of this too, i'm pretty sure there is a site like that. I'd imagine the seller lists a mandatory price and as long as the total reaches it (or exceeds it), then the highest bidder gets it.

[@jbjba12345]

I can't believe balloon Kevin was holding an auction for a PS5, and real kevin only bid $3

[@DoubleOhSilver]

We're missing information. By the video, the $8k bid strategy still works because you didn't mention how the $8k doesn't have to be outbid during the auction. The price of the item raises and your bid is used up to keep you in the lead. So if you bid $8k, the item can jump to $1200, but you'll stay the highest bid until all $8k is used up. So it's less of "you pay the second highest bid" and more that the item price and bid are two independent numbers.

[@Stubbari]

Well, if you value the product at 8k then of course the 8k method is going to work. If you value the item at $550 but bet 8k just to get the item then most likely you are overpaying.

[@jadenchen8921]

Real Kevin for the win! Stop hating on him Balloon Kevin

[@DCMCOSPLAYdotCOM]

One thing, many people do not bid honestly on ebay. Sure the system used is honest in theory, but often someone will bid, are beaten by a pro gamer strategy, then wait until the auction is about to end, and then play their honest hand. When it's sealed envelopes, you go as high as you think its worth because that's the only way to be sure. But on ebay, as long as the clock is running, opponents have a chance to perhaps, bend a little further and pay more than what they honestly thought it was worth. This is compounded by the whole "if someone else thinks its worth that... maybe it is" train of thought. All I got to say is, Im glad ebay doesn't extend the clock when a bid comes in like Yahoo auctions did. ^_-

[@astroidz7039]

2:16 is probably gonna turn into a new meme format

[@Anonymimus]

That photo of Michael with the acknowledgement of the pro gamer move meme right after it might have made me laugh a little bit too hard :'D

[@UDX6T]

That was a serious pro gamer move tho. (He did outbid everyone even though he might have lost a kidney or two doing it)

[@Demasx]

NPR's Planet Money just did an episode (11/6/20) called "Hacking The Perfect Auction" on how people figured out how the game the FCC auction of electromagnetic spectrum defeating the Vickrey Auction. It's a great companion to this!

[@squg805]

wholesome 100

[@thomasnessen1]

I have a studied Economics so nothing was new for me here but it was still so entertaining and interesting. Great job real Kevin!

[@legocuber1420]

3:06 I almost left the video how dar u

[@Neverender6]

Interesting fact: The ancient Babylonian auctions written about by ancient Greek historian Herodotus (mentioned at 10:24 of the video) were actually marriage markets. This is what he wrote about them: "In every village once a year all the girls of marriageable age used to be collected together in one place, while the men stood round them in a circle; an auctioneer then called each one in turn to stand up and offered her for sale, beginning with the best-looking and going on to the second best as soon as the first had been sold for a good price. Marriage was the object of the transaction. The rich men who wanted wives bid against each other for the prettiest girls, while the humbler folk, who had no use for good looks in a wife, were actually paid to take the ugly ones, for when the auctioneer had got through all the pretty girls he would call upon the plainest, or even perhaps a crippled one, to stand up, and then ask her who was willing to take the least money to marry her - and she was offered to whoever accepted the smallest sum. The money came from the sale of the beauties, who in this way provided dowries for their ugly or misshapen sisters. It was illegal for a man to marry his daughter to anyone he happened to fancy, and no one could take home a girl he had bought without first finding a backer to guarantee his intention of marrying her. In cases of disagreement between husband and wife the law allowed the return of the purchase money. Anyone who wished could come even from a different village to buy a wife." Herodotus then laments how this "admirable practice" has since fallen into disuse in favour of prostitution.

[@behruz1691]

5:29 That box is definitely empty You can see how light it is...

[@AeroQC]

TIL there are more than two types of auctions. I only ever imagined auctions in the open-format bid-war style that's synonymous with most characterizations of an auction and the closed-envelope "sealed auction" with one bid per person and highest bid wins outright.

[@saarker4791]

Micheal is truly a Gamer, paying $8000 for a PS5

[@chompyumyum4615]

honesty is always the most efficient in anything ever

[@q0zm0s75]

Glad to be so early.

[@Platin_2004]

You didn't even finish it

[@SuperYoonHo]

Thank you!

[@ErikNilsen1337]

10:32 "In 4,500 years of thinking about auctions, the mathematical development optimizing the activity of billions of people is really close to just... being honest." _The Religious Society of Friends liked that._

[@ForeShadow20]

You missed one type of auctioning. The one where you pay to place a bid (non-refundable) and the item increases in price (pennies or dollars) as you place bids.

[@davidjones4748]

Why is this balloon talking about auctions?

[@bananacheesecake6821]

I'm not interested in the PS5, but I would pay anything for that Big Chungus painting

[@stefanv9763]

Hello there Kevin •_•

[@EtherBotGames]

im not kevin but hi to you

[@ViratKohli-jj3wj]

@@EtherBotGames good bot

[@EtherBotGames]

@@ViratKohli-jj3wj hi to you as well

[@bubbagc859]

Thanks for explaining the 2k MyTeam auction house

[@LlamaAlarma]

There actually isnt a "Nobel Prize for economics", Alfred Nobel rightfully only wanted real science to get his prize. The Prize for economics in memory of Alfred Nobel is something economists came up with to legitimize their mostly whacko theories.

[@Oskiirrr]

I was about to comment this

[@QBAlchemist]

I would argue that the Ebay auction method is not the Vickery method. The Vickery method relies on the bids being revealed and the auction concluding at a single period of time - bidders only being able to bid a single time with their honest/maximum bid. While I can understand why the Ebay method appears similar: a bidder can enter a single high bid, and the Ebay system will only charge you for the 2nd highest bid plus the increment; In fact, this is just some 'operational sugar' on the standard English auction. Ebay will simply remember your highest bid, and then every time a new bid is placed on that item, it will check to see if your highest bid out-ranks it, and will automatically re-apply your new bid over theirs. Note, you do not win instantly, and opponents have the opportunity to increase their bid beyond their normal maximum if they so choose, without the risk of potentially losing value since they already know your current highest bid. If I am not mistaken on my understanding, the clip of the Ebay bidding at 9:36 supports my claim. Personally, I don't think it matters all that much for the content of the video. The Vickery method is still the preferred method, and the video information is still accurate - I just believe based on my current knowledge that Ebay does not in fact use the Vickery method (though I wish it did).

[@legitsubbingtoeveryonewhos8274]

sending virtual hugs to everyone who needs it stay safe and stay possitive everyone! 💡:)

[@EebstertheGreat]

What do you call a type of silent auction where all bidders pay, but only the highest bidder wins? Imagine it's like a normal silent auction, but instead of writing a secret bid on a slip of paper and putting it in the box, you stick a secret amount of cash in an envelope and put that in the box. At the end of the auction, the bids are all compared, and the winner takes all. This seems like the most egregiously unfair format for the bidders. It's basically like a raffle, but instead of picking the winner at random, the one with the most tickets just always wins.

[@danielmakhlouf8931]

Pov: you're trying to comment something funny

[@jimtrue1465]

Even in an open bid auction, the winner doesn't pay what he thinks the item is worth. Let's say bidder A is willing to go as high as $300 for an item, while bidder B is willing to go as high as $500, and they are the only two bidders. Once the bidding reaches $300, and bidder B bids $325, bidder A drops out and bidder B wins. He only pays $325, even though he was willing to pay as much as $500.

[@Bodyknock]

What's interesting is that Vickrey auctions aren't used more often in computer and board games. Most MMO RPG auction houses for example have systems where the highest bidder pays the price they bid or systems where sellers place items up at a desired price and buyers offer amounts at a desired price. But I don't think I've ever seen one that does a Vickrey system .

[@JackG515]

Kevin: “What are auctions?” KZbin: An ad for the Chevy Silverado

[@Wbfuhn]

To me, auctions are better than scalper prices. Scalpers will put a set price above retail, double price, instead of putting the device at base price and let bidders stack the bid until one person remains. Rather than be forced to pay over retail price people have a chance to get something for what they can and are willing to pay.

[@snugbreezy4523]

I had a feeling Michael would be number 4. Good stuff, Sir.

[@ivankacarski5538]

Welcome back

[@isettech]

The Auction I join is similar. I can bid up the old fashioned way, or enter a Maximum bid. Say I put in a maximum bid of $300, and the other bidder stopped at $160. My auto bid would then win me the item at $170 as that is the next bid increment. Most of the time, I am outbid. However sometimes, they have an item the bidders are not looking for, or it is poorly attended. At those I pick up some great deals. For example, bought a pallet of PC's at a government surplus auction and averaged $25 each for them. Had a heyday on CL selling them from $100 to $200 each depending on memory and processor. Last week got a dozen LCD monitors for $ 10 each. Selling them for $20 to $50 each depending on the model and screen size. Sold 5 of them as a batch today. Love a good government surplus auction. Picked up my 4KW diesel generator for under a grand. Nice buy.

[@CoxTH]

There is a key difference between a standard Vickerey auction and eBay, though. In the standard auction, everyone submits their bid at once and the bids are revealed in the end. In an eBay auction, the bids are "open" in the way that each bidder at least knows the second-highest bid. So the ideal strategy in an eBay auction is to wait until the very last second to bid, giving the highest price you're willing to pay. This practice is called bid sniping and the most common way these auctions are won.

[@JonRobert]

Excellent explanation. (NB: Herodotus was 2,500 years ago, not 2,500 BC.)

[@RialVestro]

There's another weird type of auction and most players don't even realize it works this way... In City of Heroes they have a highest bidder/lowest seller auction. When you go to sell an item you set the lowest amount of money you're willing to sell the item for. However because of the way the auction system works the person who bids the highest on an item will always buy from the person who sold for the lowest price. Because of this the same item can be posted for 9 influence/infamy (The currency of the game) and 1,000,000,000 inf. While you can't get a bid lower than your sale price you also will be unlikely to sell an idem at all if you set the price high and if it does sell it won't be for any more than what you actually set the price at. Because the highest bidder always buys from the lowest seller, items sold at 9 inf will actually sell much higher, the highest price possible that anyone is willing to pay for that idea. By selling high you might be low balling yourself, not getting the best value for the item you're trying to sell and may not sell at all if your set the price too high that no one is paying. But by setting the Price low, at 9 inf you're guaranteeing that you will always make a profit no matter what the item actually sells for because you're guaranteed to get the highest bid on that item. The reason you need to sell for 9 instead of 1 by the way is that the Auction House itself charges a minimum fee of 5 inf. If you sell an item for less than that and the highest bid at the time is also under that price you risk spending more money than what you would Earn. So 9 inf is the lowest price you can sell and still make some kind of a profit even if the bids are low. As far as I know this kind of bidding only exists in that game and even though the develops said that's how the auction house works I've found that most people never read that and just assumed when they saw "Auction House" that it worked like a normal auction... it doesn't. I got rich in the game selling items for 9 inf. cause most people sell high I always get the highest bid available at any given time. I've gotten anywhere from 110 to 50,000 on items I only posted for 9 inf and if I actually set the price at 110 to 50,000 they'd likely never sell at all. Some people actually set their sales price based on the highest price sold in the past and never sell anything unless the prices get inflated... which they fluctuate daily but it can take weeks to sell anything that way.

[@koalaeatleaf]

I am watching this again as your videos are always interesting and entertaining. You open envelopes like a psychopath though!

[@The.171]

best auction I've ever seen

[@kingslayer5852]

Just noticed the background blue and red lights are also in jacksepticeye videos which makes the videos even cooler to see

[@antoinefdu]

This is indeed how the greatest auction house in the world works, but that auction house is not Ebay. It is way, way bigger than that, and it also happens to be the auction house that financed this very video : Google. Former PPC manager here: The way platforms like Google determine which ad gets shown to which user and when is determined by an auction that follows the exact same principles as the one Kevin just described: Imagine I own a website that sells, oh idk, PS5's. Imagine also that I sell my PS5's at a $50 markup, meaning that each time I sell a PS5, I make $50. I, as an advertiser, know that, and I also know that if I get to show my ads to VSauce2's viewers, approximately 1 in 5 of them will click on the ad and go to my website, and that of those who do end up on my website, 1 in 5 will end up buying a PS5. Meaning that for each time I show an ad at the end of this video, I have 1 in 25 (5*5) chance to end up selling a PS5, and thus to make $50 in revenue. Meaning that the expected value of that ad is $50/25, or $2. If I pay Google $2 per view, I break-even. If I pay less, I make a profit, if I pay more, I lose money. Now the way Google decides which ads gets shown before which KZbin video is through an auction. I, as an advertiser, come to Google's auction house with my bid, and so do thousands of other advertisers. I know that $2 is my upper limit, but I might not want to offer Google that bid straight away. After all, if I end up paying exactly $2 per view, I might sell a lot of PS5's, but I will make $0 profit. So I could be tempted to try low balling Google and bid $1 instead, hoping that none of my competitors will try to bid higher than that on this video, but that's a risky strategy. What if the highest bid ends up being $1.10? If I had bid just a little bit more, say $1.11, I would have sold quite a lot of PS5's and I would have still made a pretty nice profit. So what should I do? Should I, as well as all my competitors come back everyday to the auction house and incrementally increase our bids by $0.01 until only one bidder is left in the race? That would be such a waste of time for everyone. Google realises that, and thus they have adopted a Vickrey auction system: each advertiser tells Google the absolute *maximum* amount they would be ready to bid for a specific ad placement. Google picks the winner, and makes him pay not his bid, but the second-highest bid. That way, everyone is incentivised to keep bidding the maximum they can. If I win and the second-highest bid ends up being $1.1, I will pay $1.1, regardless of whether my initial bid was $2 , $5, $10, or $1,000,000.

[@R2Cv1]

Let's just appreciate the phenomenal background music for a bit.

[@ThatWeirdLegoBuilder]

As a Dutch person, I have never seen a Dutch auction in my life