Hacker News Reader

Comment by bluGill | Hacker News Reader

Will the losing bidders drop out, or not? In a sealed bid you have to guess what others will bid - you want to bid $1 more than your competitors (or if you will lose the bid make your competitor pay as much as possible). The judge is saying because the bids were seals losing bidders had no clue what their correct bid is and some are likely to have bid less than they would have in open bidding.

Who is right I don't know.

View on HN

> judge is saying because the bids were seals losing bidders had no clue what their correct bid is and some are likely to have bid less than they would have in open bidding. Who is right I don't know.

Sealed-bid auctions are incredibly common across markets [1]. Real estate. Corporate mergers.

Note, too, that an English auction is revenue equivalent to a second-price sealed-bid auction [2], and here we had a first-price sealed-bid auction with two bidders.

There may be valid reasons to challenge this auction. Sealed bids is absolutely, definitively not one.

[1] https://en.m.wikipedia.org/wiki/First-price_sealed-bid_aucti...

[2] https://www.sfu.ca/~idudnyk/Auctions_Part2_Revenue_Equivalen...

you need a lot more than 2 bidders for the theory to hold. Repeating the auction just seems pointless, but another avenue could be for the assets to not be sold, and the claimants to receive 100% of the equity of the business. Then over time they can potentially see a better recovery than what they are getting from a sale.

> you need a lot more than 2 bidders for the theory to hold

Wrong. Vickrey auctions are well studied in single-item auctions even with two bidders [1]. (They perform between 4/3 and 2 compared to an optimal omniscient auction. Not solved. But not unstudied.)

> claimants to receive 100% of the equity of the business

This is Chapter 7. The bankruptcy estate already legally owns the asset, not Jones.

[1] https://www.timroughgarden.org/papers/bk.pdf Examples 4.6 and 5.2

The trustee gets something like 3% over $1million in liquidated assets.

Call it 52,000 from the onion sale.

well now someone says I could have bought it for 10 million.

trustee now gets $300,000. They’re not going to get in the way.

Why do you think this is relevant? (Everyone is ostensibly trying to maximise the price.)

I am not disagreeing with anything you have said here. Sealed-bid is common. Sometimes it works well, sometimes it doesn't. It is debatable if it is better or not.

> It is debatable if it is better or not

No, it really isn’t. Not with two bidders. The moment the first party announces their bid you have perfect collusion (if the second party, rationally, runs out the clock) or a stalled auction (if running out the clock is impossible, thereby always allowing someone to always claim they’ll bid better).

You can test this in boardgames about auctioning: See Modern Art, a game about profiting from art, where you have multiple forma of bidding. Part of the game is to figure out when each auction will provide the most money.

Blind bidding doesn't let people improve their bid, but it also lets someone bid much higher than the second best bid, so it can be extremely profitable in some situations. Compare to a version of said auction where you bid only once, but where the winner will only pay the second best bid plus one.

Uncertainty makes bids go up. Introducing the possibility that perhaps there might be a second round after a bid turned out to be too low reduces uncertainty.

Imagine game theory dynamics in poker if an unhappy player could say "well, come to think of it, I guess I did not really want to see, I'd rather fold"

In a single round sealed bid auction, it’s equally likely that a winner will have bid more than they would have in open bidding since they only get one shot to name a price.

Maybe. Some will do this. Some will try for a deal in hopes that nobody else is bidding.

Reply on news.ycombinator.com