Loading in 5 sec....

COS 444 Internet Auctions: Theory and PracticePowerPoint Presentation

COS 444 Internet Auctions: Theory and Practice

- 127 Views
- Uploaded on

Download Presentation
## PowerPoint Slideshow about 'COS 444 Internet Auctions: Theory and Practice' - fidelina

**An Image/Link below is provided (as is) to download presentation**

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript

Mechanics

- COS 444 home page
- Classes:
- experiments

- discussion of papers (empirical, theory):

you and me

- theory (blackboard)

- Grading:
- problem set assignments, programming

assignments

- class work

- term paper

Background

- Freshman calculus, integration by parts
- Basic probability, order statistics
- Statistics, significance tests
- Game theory, Nash equilibrium
- Java or UNIX tools or equivalent

Why study auctions?

- Auctions are trade; trade makes civilization possible
- Auctions are for selling things with uncertain value
- Auctions are a microcosm of economics
- Auctions are algorithms run on the internet
- Auctions are a social entertainment

Cassady on the romance of auctions (1967)

Who could forget, for example, riding up the Bosporus toward the Black Sea in a fishing vessel to inspect a fishing laboratory; visiting a Chinese cooperative and being the guest of honor at tea in the New Territories of the British crown colony of Hong Kong; watching the frenzied but quasi-organized bidding of would-be buyers in an Australian wool auction; observing the "upside-down" auctioning of fish in Tel Aviv and Haifa; watching the purchasing activities of several hundred screaming female fishmongers at the Lisbon auction market; viewing the fascinating "string selling" in the auctioning of furs in Leningrad; eating fish from the Seas of Galilee while seated on the shore of that historic body of water; …

Cassady on the romance of auctions (1967)

... observing "whispered“ bidding in such far-flung places

as Singapore and Venice; watching a "handshake" auction

in a Pakistanian go-down in the midst of a herd of dozing

camels; being present at the auctioning of an early Van

Gogh in Amsterdam; observing the sale of flowers by

electronic clock in Aalsmeer, Holland; listening to the chant

of the auctioneer in a North Carolina tobacco auction;

watching the landing of fish at 4 A.M. in the market on the

north beach of Manila Bay by the use of amphibious landing boats; observing the bidding of Turkish merchants

competing for fish in a market located on the Golden Horn;

and answering questions about auctioning posed by a group of eager Japanese students at the University of Tokyo.

Auctions: Methods of Study

- Theory (1961--)
- Empirical observation (recent on internet)
- Field experiments (recent on internet)
- Laboratory experiments (1980--)
- Simulation (not much)
- fMRI (?)

History

Route 6: Long John Nebel pitching hard

Standard theoretical setup

- One item, one seller
- n bidders
- Each has value vi
- Each wants to maximize her
surplusi = vi – paymenti

- Values usually randomly assigned
- Values may be interdependent

English auctions: variations

- Outcry ( jump bidding allowed )
- Ascending price
- Japanese button

Truthful bidding is dominant in Japanese button auctions

Truthful bidding is dominant in Vickrey auctions second-price

Japanese button and Vickrey auctions are (weakly) strategically equivalent

Dutch descending-price second-price

Aalsmeer flower market, Aalsmeer, Holland, 1960’s

Sealed-Bid First-Price second-price

- Highest bid wins
- Winner pays her bid
How to bid? How to choose bidding function

Notice: bidding truthfully is now pointless

Enter John Nash second-price

- Equilibrium translates question of human behavior to math
- Howmuch to shade?

Nash wins Nobel Prize, 1994

Equilibrium second-price

- A strategy (bidding function) is a (symmetric) equilibrium if it is a best response to itself.
That is, if all others adopt the strategy, you can do no better than to adopt it also.

Simple example: first-price second-price

- n=2bidders
- v1 and v2uniformlydistributed on [0,1]
- Find b (v1 ) for bidder 1 that is best response to b (v2 ) for bidder 2 in the sense that
E[surplus ] = max

- We need “uniformly distributed” and “E[ ]”

Verifying a guess second-price

- Assume for now that v/ 2 is an equilibrium strategy
- Bidder 2 bids v2 / 2 ; Fix v1 . What is bidder 1’s best response b (v1)?
E[surplus] =

Bidders 1’s best choice of bid is b =v1 / 2 … QED.

Download Presentation

Connecting to Server..