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Jump Bidding
In auction theory, jump bidding is the practice of increasing the current price in an English auction, substantially more than the minimal allowed amount. Puzzle At first glance, jump bidding seems irrational. Apparently, in an English auction, it is a dominant strategy for each buyer whose price is above the displayed price, to always bid the minimal allowed increment (e.g. one cent) above the displayed price. By bidding higher, the bidder gives up the opportunity to win the item at a lower price. However, in practice buyers increase the displayed price much more than the minimal allowed increment. Buyers may even sometimes offer an increase on their own high bid, seemingly irrationally. Several explanations have been suggested to this behavior. Reducing bidding costs When bidding is costly, or when time is costly, jump-bidding allows the bidders to reduce their total costs and get to the outcome faster. Signaling Consider two veteran bidders, that compete with each ot ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Auction Theory
Auction theory is an applied branch of economics which deals with how bidders act in auction markets and researches how the features of auction markets Incentivisation, incentivise predictable outcomes. Auction theory is a tool used to inform the design of real-world auctions. Sellers use auction theory to raise higher revenues while allowing buyers to procure at a lower cost. The conference of the price between the buyer and seller is an economic equilibrium. Auction theorists design rules for auctions to address issues which can lead to market failure. The design of these rulesets encourages optimal bidding strategies among a variety of informational settings. The 2020 Nobel Prize for Economics was awarded to Paul R. Milgrom and Robert B. Wilson “for improvements to auction theory and inventions of new Auction#Types, auction formats.” Introduction Auctions facilitate transactions by enforcing a specific set of rules regarding the resource allocations of a group of bidders. T ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
English Auction
An English auction is an open-outcry ascending dynamic auction. It proceeds as follows. * The auctioneer opens the auction by announcing a suggested opening bid, a starting price or reserve for the item on sale. * Then the auctioneer accepts increasingly higher bids from the floor and sometimes from other sources, for example online or telephone bids, consisting of buyers with an interest in the item. The auctioneer usually determines the minimum increment of bids, often making them larger as bidding reaches higher levels. * The highest bidder at any given moment is considered to have the standing bid, which can only be displaced by a higher bid from a competing buyer. * If no competing bidder challenges the standing bid within the time allowed by the auctioneer, the standing bid becomes the winner, and the item is sold to the highest bidder at a price equal to their bid. *If no bidder accepts the starting price, the auctioneer either begins to lower the starting price in increme ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Signaling Game
In game theory, a signaling game is a simple type of a dynamic Bayesian game.Subsection 8.2.2 in Fudenberg Trole 1991, pp. 326–331 The essence of a signalling game is that one player takes an action, the signal, to convey information to another player, where sending the signal is more costly if they are conveying false information. A manufacturer, for example, might provide a warranty for its product in order to signal to consumers that its product is unlikely to break down. The classic example is of a worker who acquires a college degree not because it increases their skill, but because it conveys their ability to employers. A simple signalling game would have two players, the sender and the receiver. The sender has one of two types that we might call "desirable" and "undesirable" with different payoff functions, where the receiver knows the probability of each type but not which one this particular sender has. The receiver has just one possible type. The sender moves first, ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Common Value Auction
In common value auctions the value of the item for sale is identical amongst bidders, but bidders have different information about the item's value. This stands in contrast to a private value auction where each bidder's private valuation of the item is different and independent of peers' valuations. A classic example of a pure common values auction is when a jar full of quarters is auctioned off. The jar will be worth the same amount to anyone. However, each bidder has a different guess about how many quarters are in the jar. Other, real-life examples include Treasury bill auctions, initial public offerings, spectrum auctions, very prized paintings, art pieces, antiques etc. One important phenomenon occurring in common value auctions is the winner's curse. Bidders have only estimates of the value of the good. If, on average, bidders are estimating correctly, the highest bid will tend to have been placed by someone who overestimated the good's value. This is an example of adverse s ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Japanese Auction
A Japanese auction (also called ascending clock auction) is a dynamic auction format. It proceeds in the following way. * An initial price is displayed. This is usually a low price - it may be either 0 or the seller's reserve price. * All buyers that are interested in buying the item at the displayed price enter the auction arena. * The displayed price increases continuously, or by small discrete steps (e.g. one cent per second). * Each buyer may exit the arena at any moment. * No exiting buyer is allowed to re-enter the arena. * When a single buyer remains in the arena, the auction stops. The remaining buyer wins the item and pays the displayed price. Strategies Suppose a buyer believes that the value of the item is ''v''. Then this buyer has a simple dominant strategy: stay in the arena as long as the displayed price is below ''v''; exit the arena whenever the displayed price equals ''v''. This means that the Japanese auction is a truthful mechanism: it is always best to act ac ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Perfect Bayesian Equilibrium
In game theory, a Perfect Bayesian Equilibrium (PBE) is an equilibrium concept relevant for dynamic games with incomplete information (sequential Bayesian games). It is a refinement of Bayesian Nash equilibrium (BNE). A perfect Bayesian equilibrium has two components -- ''strategies'' and ''beliefs'': * The strategy of a player in given information set specifies his choice of action in that information set, which may depend on the history (on actions taken previously in the game). This is similar to a sequential game. * The belief of a player in a given information set determines what node in that information set he believes the game has reached. The belief may be a probability distribution over the nodes in the information set, and is typically a probability distribution over the possible ''types'' of the other players. Formally, a belief system is an assignment of probabilities to every node in the game such that the sum of probabilities in any information set is 1. The strate ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Self-enforcing Agreement
A self-enforcing agreement is an agreement that is enforced only by the parties to it; no external party can enforce or interfere with the agreement. (In this respect it differs from an enforceable contract A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tr ....) The agreement will stand so long as the parties believe it is mutually beneficial and it is not breached by any party. In game theory, games in which cooperative behaviour can only be enforced through self-enforcing agreements are called non-cooperative games, whereas games allowing strategies relying on external enforcement are called cooperative games. Nash equilibrium is the most common kind of self-enforcing agreement. References Agreements Game theory equilibrium concepts {{business-term-stub ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Bid Shading
In an auction, bid shading is the practice of a bidder placing a bid that is below what they believe a bid is worth. Bid shading is used for one of two purposes. In a common value auction with incomplete information, bid shading is used to compensate for the winner's curse. In such auctions, the good is worth the same amount to all bidders, but bidders don't know the value of the good and must independently estimate it. Since all bidders value the good equally, the winner will generally be the bidder whose estimate of the value is largest. But if we assume that in general bidders estimate the value accurately, then the highest bidder has overestimated the good's value and will end up paying more than it is worth. In other words, winning the auction carries bad news about a bidder's value estimate. A savvy bidder will anticipate this, and reduce their bid accordingly. Bid shading is also used in first-price auctions, where the winning bidder pays the amount of his bid. If ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Calor Licitantis
Calor licitantis is a Latin phrase, the literal translation of which is, "heat of soliciting." The functional use of the phrase in both modern times and antiquity is "bidder's heat". This is also known as "auction fever". Origins The phenomenon of calor licitantis is believed to be as old as auctions themselves. This term was first used in the court system of Rome to describe the irrational behavior of bidders at auctions. The use of the phrase seemed to describe both the mental state of the bidder and the result of that state; specifically, that through the bidding process undertaken by one suffering from ''calor licitantis'', the price of an item was driven above and beyond its typical or expected value. Bidder's Heat in Antiquity According to the Corpus Juris Civilis, the official body of Roman law, a bidder could be released from their bond to a purchase if ''calor licitantis'' had led to inflation of the price of the item in question such that the bidder could not rea ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
