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Comment by whymauri | Hacker News Reader

The highest bidder pays the second highest bid. Generalized, the k-th highest bidder pays the (k-1)-th bid for some k-th item.

It enforces truthful bidding and is revenue optimal. How is it needlessly complex?

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You're describing the generalized second price auction (GSP) which is NOT incentive compatible, which means the optimal strategy isn't to bid truthfully. VCG is.

You are correct. I wasn't very clear/am very tired.

That being said... GSP on one item is VCG, no?

As I understand it, GSP on a single item is just a standard second price auction which is truthful.

That's correct.

While revenue optimal, growth in retail is eventually driven by psychology, not pricing, since if there’s anything our real economy is good at producing, it’s morons.

That's the Bulow-Klemperer theorem. You would rather have more growth (bidders) at the expense of an optimal bidding mechanism.

If actors are humans, then sure. But if actors are rational computers, and it's used billions time a day, you might prefer optimality.

Not saying this would be useful for communication between computers, but coming from CS degree, I have the intuition it could have some use cases.

It's needlessly complex because it doesn't solve any problems I have or any I have heard of. A simpler auction would still work pretty well, and be more easily understood by participants.

I ask because the only case I can think of this providing any value, it would be too complex. The example would be splitting up the assets after a divorce, where each spouse bids on the parts of the estate. A VCG auction may be more accurate, but what couple or lawyer would agree to use this system? It's too complex.

What "simpler auction system" would you propose?

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