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...

[@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

[@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

[@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

[@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.

[@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

[@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?

[@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 😜

[@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.

[@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.

[@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 :)

[@sigmagamingg420]

ok

[@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.

[@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?

[@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

[@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

[@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.

[@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

[@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

[@gingerinajacket8519]

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

[@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.

[@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

[@sigmagamingg420]

yes

[@P3skyBee]

Papa Flammy

[@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

[@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’.

[@jcb3393]

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

[@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.

[@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

[@fn9869]

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

[@thomas3754]

Did he find one?

[@Milkcake00]

Lol

[@AverytheCubanAmerican]

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

[@holdenlester]

Found you again!

[@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 😢

[@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.

[@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

[@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.

[@San-lh8us]

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

[@ButCritically]

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

[@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!!

[@YozyYoutube]

5:00 That is a $4,952,763 painting

[@DeadMan74]

Lowkey he just flexed that he got the PS5

[@funtechu]

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

[@panociagasta]

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

[@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.

[@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

[@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.

[@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

[@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.

[@mega-flare]

honesty is always the most efficient in anything ever

[@caseclosed9612]

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

[@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.

[@wardenActual]

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

[@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.

[@catakuri6678]

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

[@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.

[@jadenchen8921]

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

[@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 .

[@astroidz7039]

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

[@pabloweap]

9:23 "[The seller] is going to get the best price for their item" Are they though? They are going to get the second best price for their item. If A is willing to spend max 100$, B 150$ and C 200$ the seller is going to sell it to C for 150$, 50$ less dollars than he was willing to pay. This seems like a disadvante for the seller, or am i missing something? And also... Ebay is not a hidden bid system, is it?

[@Stubbari]

Second best price is the "best price" though. If it was an open auction do you think C would bet $200 after hearing B's bet of $150? C would bet $151 which is out of the budget of B and thus he would win and pay the best price (which is the second highest bid). Nobody is going to raise the bid directly to their maximum budget (unless they are flexing).

[@pabloweap]

@@Stubbari but even in your example the seller gets 150$ instead of 151$. I agree it`s not alot, but thats already accepting that everyone stops at their max budget and you can icnrease the price by 1$. Also i would argue the "highest price" is the highest price anyone is willing to pay for it. At least from the sellers perspective, a system would be "good" if it enables them to get this price from the buyer

[@Stubbari]

@@pabloweap Maybe Kevin forgot to mention but the winner of Vickrey auction pays the 2nd bid + minimum bid increase. In this case the $1. If your budget is $200 that doesn't mean you are willing to that amount of the item if everyone else is willing to pay $100. The whole point of auctions is that people come up with the price together (mainly the winner and the second bidder).

[@legocuber1420]

3:06 I almost left the video how dar u

[@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).

[@behruz1691]

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

[@connormcmk]

Thanks!

[@NStripleseven]

this lad

[@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)

[@IlTrojo]

I remember reading about an auctioning system in sealed bids but then the second highest bidder wins. The idea behind was to make sure everybody has a fair chance and prevent someone who could bid a lot more than everyone else from simply outbid the system. How is this called?

[@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._

[@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!

[@saarker4791]

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

[@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!

[@squg805]

wholesome 100

[@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.

[@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

[@Vaaaaadim]

Hm. To my memory there were some who had purposely outbid everyone on stuff from these auctioning sites and then just canceled their thing. Adding features on top of things that work may break stuff.

[@q0zm0s75]

Glad to be so early.

[@Platin_2004]

You didn't even finish it

[@nafis_zaki]

Good primer on Vickrey's auction proposals.

[@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

[@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.

[@danielmakhlouf8931]

Pov: you're trying to comment something funny

[@Cosmosisification]

It's kind of a conundrum, because the best known strategy being "honest bidding" in turn makes the best strategy "bid insanely high"

[@Stubbari]

Not really. You just risk overpaying by doing that.

[@Cosmosisification]

@@Stubbari well there's always a risk no matter what. It's still the best counter strategy to the best strategy

[@Stubbari]

@@Cosmosisification No there isn't. If you value an item X for $100 you should bet $100. If your bid is the highest then you'll end up paying less than the value of the item (for example $90). If the highest bid is $120 then you lose and don't have to pay anything. So there's no risk if you are honest. Now if you aren't honest and bid more than the value, for example $150, you risk paying more. If we compare it to the last situation you win in both cases but in the latter you pay $20 extra so your expected income is -$10 whereas it's +$10 if you are being honest.

[@Cosmosisification]

@@Stubbari that's exactly my point. You're correct, if you value an item at $100, you should absolutely bet $100. But when that is the best known strategy, then the actual best known strategy is big high because it's a direct counter to the most commonly known, best strategy.

[@Stubbari]

@@Cosmosisification No, just no. Some other bidder might value the item at $200 so if you bid more than they you'll end up paying twice what you value the item at.

[@davidjones4748]

Why is this balloon talking about auctions?

[@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. ^_-

[@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

[@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.

[@snugbreezy4523]

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

[@repdoderpo1234]

5:57 what happens to the words "equal probability" as you hand goes back to the left? is this some greenscreen or something? the words get shakey

[@Dashitishere22]

I'm confused as to how an ebay bid is pretty much a vickrey bid? A vickrey bid assumes its a sealed-bid auction where you can't see what the others are bidding. The fact that e-bay allows you to see what the others are bidding makes it not remotely similar since you would never be able to game the system in the way Michael Stevens did.

[@conradkorbol]

His point was that you can’t really game them system in either. Being honest is the best way to ensure a good price. It’s dumb to be dishonest here

[@quintessenceSL]

@@conradkorbol Sure you can. If I set up a series of auctions where I pay significantly more than usual price, I drive up the perception of what the value of a thing is (essentially a bubble). If I lose, someone else is paying the inflated price. If I win, I lose the auction fee, but I have driven up the average valuation (you see this all the time where one seller lists a book for something outrageous like $5,000 and all the other prices start to creep up). If I pull from Hayek's idea markets are information exchanges, a Vickrey auction is withholding information from interested parties and being told this is more "fair". It's not even really gaming the system because the system was gamed from the onset.

[@Grey_Warden_Invasion]

Am I misunderstanding something? How is Ebay working that way? I am not on Ebay often because auctions there are way too crazy fast and often getting too expensive for me. But the last time I was there it wasn't secret bids, you could see the last placed bids and the price rising, depending on the item some people were willing to overbid by a lot and the few times I actually won an auction, I paid exactly what I bid and not the second highest bid.

[@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.

[@civilisedzombie]

Sealed bid auctions are used when you are selling a house and get a pre-emptive offer.

[@TheSuperappelflap]

in the netherlands, every house is sold in a closed bid auction, the realtor will never tell you about any other bids. they only give you a valuation of the property. due to housing shortages, its now quite common for people to overbid 10 or 20% compared to the valuation, on properties theyve never seen, just to have a chance at getting one.

[@JackG515]

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

[@aaronbredon2948]

Ebay isn't a Vickrey auction, although the best way to bid early is the honest price. It's not a "single sealed bid auction", but a timed sequential hidden bid auction. Since the former high bidder is notified, there is some incentive to bid lower and come back later. Since there is no real penalty to not paying, and the seller can offer the item to the second highest bidder if not paid, the seller is incentivized to have a confederate submit high bids then offer to the 2nd highest. I make it a policy never to follow through with such offers. I would rather the seller resist the item.

[@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.

[@power-max]

So Hol up! If I am in a bidding war and suddenly bid something ridiculous like $999 for something worth maybe $100 where the current bid is at 60$. then do I win the auction and only pay the second highest bid of $60 in this example?

[@alex2005z]

Yea, but if someone had the same idea, but bet only $500 you get owned

[@landshark1215]

What was up with that weird morph at 05:56?

[@stokhosursus]

I’m confused. What am I missing? How is eBay using a Vickery auction? One always knows what the current bid is and can react based on that information, to the point of waiting until the last few seconds to outbid the previous winner. Also, I’ve never had an auction where I paid less than the winning bid that I made. However, I think this is more due to the nature of what constitutes “bidding.” In the case, that one is referring to their maximum bid and not the current bid value, then it is true you’re only paying one bid increment above the second highest bidder. In fact, in the context of maximum bids, one might somehow be able to say that upon setting one’s maximum bid, one doesn’t know other’s maximum bid. However, that’s not completely the same as a Vickery auction since you actually do know at the time all but one person’s maximum bid. In fact, because of the difference in knowing something about the current bids and not bidding yourself until the absolute last second, you could possibly bid a ridiculous amount and be guaranteed to pay no more than one bid increment above the second highest bidder. This, of course, could backfire like a standard Vickery auction if another employs the same strategy with a slightly less ridiculous amount. However, there’s more going on that drives this type of auction away from honestly bidding like a Vickery auction. First, you can track the general trend of bid amounts over the course of the auction to successfully arrive at a strategic bid amount that is less than your honest value. Second, you can see the number of watchers of a particular auction and make a logical guess as to the chance that you might run into another last-minute bidder based on the bidding history. Third, the seller can not only track but also collude with another (let’s call them the “seller’s representative”) to impact the outcome of the auction using some of the above information, and even in the case the seller’s representative accidentally wins the auction instead of merely driving up the value, the only loss to the seller are the listing fees since the item never needs to exchange hands in reality. Depending on the demand for the item being sold, this type of seller strategy could quite easily benefit the seller since there’s a higher probability, especially as competitor auctions are ending, eventually the strategy works and the seller sells the item for a high enough price to greatly outweigh any earlier losses. What’s more is this process can be automated smartly if someone is knowledgeable enough (and have a black enough soul). This could perhaps be prevented by eBay and probably would be if it caused them to lose more business than what the collected fees outweigh. However, even in this case, eBay would only need to restore consumer confidence by discovering and eliminating a small percentage of those employing such strategies and tools, assuming they could discover these sellers and assuming just the mere appearance of discovery and elimination without actual discovery and elimination were not sufficient. Nevertheless, a deeper analysis of this pseudo-Vickery auction and its repercussions would make a great paper for someone if it has not already been written.