Did the judge argue against the single round or the sealed price?
Criticising sealed bids is nonsense. The gold-standard auction (Vickrey, or more accurately, VCG) features sealed bids. If the judge is criticising sealed bids at all, The Onion should appeal.
Criticising a single-round auction, particularly with two bidders, on the other hand, is valid.
> as the families forgoing parts of their judgements is allowed to be part of the bids though any competing bids seem doomed, it's a big war chest they can throw around that's essentially meaningless because they'll never be able to collect it anyways
Isn't it also meaningless if the person whose estate they're collecting is bidding against them?
> Isn't it also meaningless if the person whose estate they're collecting is bidding against them?
The blatant attempts to move assets out of InfoWars during the bankruptcy is an entirely different story but that money may technically come legally from outside the estate.
Sure. But nobody uses Vickrey because it's impossible to explain to the public why the highest bid wasn't accepted.
> Without the second price you're trying to bid just enough to outbid the other party/parties which won't maximize bid size
Which is exactly what happens in any single-round first-price format. The only thing an open auction does is facilitate collusion. Let me repeat: for a single-round first-price auction, sealed bids are the only way to go.
> that money may technically come legally from outside the estate
It may but it doesn't. Jones saying the judge "ruled in our favour" (emphasis mine) sort of gives away the game.
Google used to use second-price for all their ads, though I think they've stopped: https://support.google.com/adsense/answer/10858748
(Which I think, sadly, supports your claim around them being confusing)
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.
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.
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.
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.
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.
> 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.
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].
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.
The reason people don't do this on eBay is because sellers can have a friend bid on the item to raise the second-place bid more than you're willing to pay (shill bidding). The Nash equilibrium for second price auctions is to only bid the maximum you're willing to pay. Bidding a higher amount leaves you vulnerable to these shill bidding tactics.
Of course... why would you ever bid more than you're willing to pay? Huge doesn't mean more than your maximum.
Also those shill bids are also betting on being able to perfectly find the point where they are juuuust below your max bid without knowing the actual max bids on the item at any given moment. If they fail they can not pay out but the seller is out their time and any listing fees (depending on the eBay era we're talking about). Conceivably you're still willing to pay your maximum bid the second time an item is available in most circumstances.
Even shill bidding aligns with the goal of auctions to find the maximum price for an item. The goal of the auction is to benefit the seller not the buyer's ability to get a deal. It would probably be fixable by making the bid more binding but that's a separate issue you're still paying at max your nominal maximum price if you win.
Yes. That or you use one shill to uncloak the max and then another to bid just below it. Worst case, as you said, you're only out your listing fee.
> shill bidding aligns with the goal of auctions to find the maximum price for an item
Which is why for high-value items in a system subject to shill bids, bona fide bidders don't put their actual maximum price into an unsealed (or semi-sealed) system. Which lowers the auction price.
Klemperer wrote an approachable intro to auction theory.
VCG is second price, so we're already in a sub-optimal regime with a first-price format. (All while illustrating why Vickrey auctions don't work with unsophisictated observers. Could you imagine the shitshow if The Onion won and then didn't have to pay their bid, but Jones's?)
Given first price, I don't think the number of rounds is revenue equivalent.
The VCG auction is only good in theory. In practice, most people don't know how much they actually value a thing, and when they are trying to play the VCG game they typically underbid and later have deep remorse. That's the most common mistake, but I've seen plenty of other mistakes as well.
In other words, VCG auctions tend not to work well because the bidders often don't have a strong enough grasp over game theory nor a deep enough understanding of how valuable an asset is to them, and therefore the VCG usually generates suboptimal outcomes.
In my experience, the auction that seems to work the best is the Ebay auction, where you get immediate feedback if you underbid, but you aren't allowed to see how high the other person is willing to go. Instead, you have to talk yourself into taking a risk on being left holding the bag if you choose to push the price up.
May I hazard a guess that you worked on low-value recurring auctions? You're describing unsophisticated bidders unwilling to expend search costs. For them, yes, "the seller has an interest in providing participants with as much information as possible about the object’s value" both before bidding starts and during it, the latter due to the impact to bids being less than the overcoming of search costs.
> the auction that seems to work the best is the Ebay auction, where you get immediate feedback if you underbid, but you aren't allowed to see how high the other person is willing to go
Another comment highlights why this doesn't work for high-value items [2]. (They also assume bona fide bids, which isn't a problem if you can filter out shill bids.)
[1] https://www.nobelprize.org/prizes/economic-sciences/2020/pop...
It varies. In all cases, the value was below $20,000, in many cases the auction was non-recurring and >$1,000 (for example, specific web domains). I've seen enough smart people fumble a $1,000+ VCG auction that I'd be nervous to assume bidding would be any better at $100 million. I've also seen enough investors fumble $10m+ investment deals (not auctions though) to feel comfortable asserting that a higher value auction does not necessarily imply that the participants will be better at auction theory.
So it sounds like the judge specifically had issues with the use of sealed bids.
The creditors already own the asset. The estate is selling, not Alex Jones.
If you asked every creditor which bid they preferred, which do you think they'd choose? The creditors forgoing their claims obviously prefer one. As for the rest, they'll choose the one that pays them more: The Onion's bid.
This isn't how bankruptcy works in practice, but it's a good shorthand for what the correct answer should be.
The parent comment, quoted above is misinformation.
What?
The whole point of bankruptcy is that the creditors do not get to vote and the solution that makes the majority happy isn't the best one. In an ideal bankruptcy everyone recovers the same percentage of their debt.
As opposed to selling the building for $1 million cash and everyone getting 2% of what they are owed.
So long as the families forgoing parts of their judgements is allowed to be part of the bids though any competing bids seem doomed, it's a big war chest they can throw around that's essentially meaningless because they'll never be able to collect it anyways.