Comment by jefftk | Hacker News Reader

Comment by jefftk | Hacker News Reader

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> eBay is a second price auction too most people just don't use it like one. You can place a huge maximum bid and will only pay the second highest bid plus an increment. It just automatically semi-unseals bids as new bids come in so it looks a lot more like a live outcry auction.

This sounds small, but it's a huge difference. Let's I know that some widget is actually extremely valuable, and would be willing to pay up to $1,000. You don't know this, and are willing to pay $80. In a true second-price auction I put in $1000, you put in $80, the bids are unsealed and I pay $80.

But with the e-bay system, if I put in $1,000 at the beginning I've partially tipped my hand by bidding it up to $80. You started with some uncertainty about the value of the object, but knowing that I agree it's worth at least $80 pushes you in the direction of thinking it's worth more. This is a major advantage of sniping: by putting your bid in only at the last minute you keep others from reacting to your bid by changing theirs, and so convert the auction into something much closer to a true second-price auction.

Yes it different but it does work to increase the bid which is the goal of an auction, discover the best price an item can be sold for in a reasonably constrained time. The fact that it's worse of you as a bidder hoping to get a deal is actually good for it as an auction design.

There's also some assumptions built into these analyses that there's at least two people who have a reasonable perception of the value of an item. Things get massively more difficult to analyze when you start including changes in perceived value.

> fact that it's worse of you as a bidder hoping to get a deal is actually good for it as an auction design

The point is, in the above example, you wouldn't bid $1,000. So I will bid $50. Then $60. Then $70. Then $80. Then $90. And then, seeing the price has changed, I will stop. And wait. I am willing to pay $1,000. But it doesn't ever make sense for me to bid that.

Even in the eBay example you're betting against their being a third party that will attempt to come in with a late bid so the auction closes before you can respond. If you want the item it's still optimal to bid your maximum and allow the second price mechanism to function, if you bid $1000 and there's only one other bid of $80 (and the price increment is $10 or 12.5%) you get the item for $90 either way no matter if you bid that manually or if you placed a maximum bid. That's how a semi-sealed second price auction works (at least as eBay implements it) the next minimum bid is revealed as new bids come in that are responding like it's a live cry out auction. If there are multiple max bids it's just set to the highest second price plus the bid increment and the max bid is still hidden.

That's the beauty of the eBay system it works for people to interact in two ways, as a more boring sealed second bid system and as a live cry auction. The biggest point it falls apart is you need a certain number of people to understand the system to act rationally about it. If you only have people treat it like a live cry auction then it defaults to acting like one.

> you're betting against their being a third party that will attempt to come in with a late bid so the auction closes before you can respond

Yes. It's why people use bots, e.g. [1].

For low-value products, particularly amidst repeat auctions, the incentive to do so is small enough that one can mostly ignore it. For a high-stakes auction, you're just devolving the game into a high-frequency race.

> If you only have people treat it like a live cry auction then it defaults to acting like one

The point is it really only works as an English auction. The "sealed" bid is for convenience. (It's not really a sealed or even semi-sealed bid, it's just a dumb auto-bidding bot.) Run a major auction with this format and you'd have zero activity until the millisecond before bids were due followed by a mountain of lawsuits.

[1] https://www.gixen.com/main/index.php

You can use bots or you can bid your true maximum and receive the best price available below it. You can't snipe a true higher still sealed bid not matter how good your bot is. If all the sniping bidder are above the sealed bidders then the auction still functions to discover higher prices just not as efficiently.

> this format and you'd have zero activity until the millisecond before bids were due followed by a mountain of lawsuits.

Sure but no one does, the eBay model is a compromise to make the bidding structure more familiar to people who don't understand the second price mechanism. Major auctions don't need to make that accommodation, the audience can be relied on to read and think about the auction structure which is unfortunately not an option you can really take for a mass market tool.

> can't snipe a true higher still sealed bid not matter how good your bot is

Of course you can. You repeatedly enter marginally-higher bids until you crest their limit. The only case where the auction is efficient is if the automatic bidder is the highest and someone else bids up to their maximum.

> can't snipe a true higher still sealed bid not matter how good your bot is

Correct. But eBay doesn't have sealed bids. You can absolutely snipe an auto-bidder; this is like the first high-speed algorithm that was ever developed in the real markets.

> no one does

Literally pointed you to an eBay bidding bot.

> the eBay model is a compromise to make the bidding structure more familiar to people who don't understand the second price mechanism

...yes. The eBay model is a compromise that works for unsophisticated bidders and low-value auctions. eBay's model is a known-flawed model that does not "discover the best price an item can be sold for in a reasonably constrained time" [1].

[1] https://news.ycombinator.com/item?id=42389361

> You repeatedly enter marginally-higher bids until you crest their limit.

That's not sniping. Inherent to last second sniping is you get a limited amount of chances to boost your bids, in the best case you're taking one shot at the bid to place it at the last millisecond eBay will accept your bid. You're trying to get the last bid in on an auction so no one has a chance to respond. Incrementally bidding up to find the ceiling is directly opposed to the goal of having a sniping bot.

> Literally pointed you to an eBay bidding bot.

That was talking about other auction runners using the eBay model for extremely high value items because of the complexity of execution, not about people using bots. I know people use bots it's just that to win they have to beat the bid placed by people using the second price functionality. I'm not denying their existence just questioning how effectively they actually distort the auction structure.

If a lot of different people (using different bots to avoid GIXEN's automatic mini auction) all place their maximum bids at the last second the winner is still the person with the max bid be that a bot user or a pre bidder.

The winning strategy to win that bidding war is still to place your maximum bid in the bot and if everyone does that it's just a normal sealed second price auction. The bot strategy just relies on there not being enough interest in every item and finding one where you can bid less than your maximum and still win which is also true of a pure sealed second price auction. I'm just not seeing where the strategy and outcome differ by including bots if there are second price bidders in the mix bidding their true max.

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