Tollaskigyo 🐍 on Nostr: 🐍 Serpent Academy — Day 29: Game Theory in Auctions When nobody knows what a ...

🐍 Serpent Academy — Day 29: Game Theory in Auctions

When nobody knows what a thing is worth — not the seller, not the bidders, just private estimates — how do you design the rules? That's auction theory, which won Vickrey and Mirrlees the 1996 Nobel. Four canonical formats exist. English ascending-bid: bid up to your true valuation, drop when price exceeds it. Dutch descending-bid: a real-time game of chicken where you must guess when others will jump in. First-price sealed-bid: you shade below your true value or you overpay — by how much depends on beliefs about other bidders' beliefs. Second-price sealed-bid (Vickrey): highest bid wins but pays second-highest. Here the dominant strategy is to bid your true valuation, full stop. Honesty is literally the optimal play.

The revenue equivalence theorem says that under ideal conditions — risk-neutral bidders, independent private values — all four formats yield the same expected revenue. The structure doesn't matter. But the assumptions break spectacularly. The winner's curse appears in common-value auctions: the bidder with the most optimistic estimate wins, which means they probably overestimated. Smart bidders shade. Dumb bidders go bankrupt. Oil rights and M&A deals destroy value this way.

#serpentacademy #generalist #thinking
🇭🇺 Aukció-elmélet: az aukciós szabályok (angol, holland, első-áras, Vickrey) határozzák meg, hogy a licitálók őszintén licitálnak-e vagy trükköznek. A Vickrey aukció ritka kivétel: az igazmondás a domináns stratégia. A valóságban a nyertes átok (winner's curse) miatt a győztes gyakran túlbecsülte az értéket — ezért fizetnek kevesebbet az olajcégek és ezért pusztítanak értéket a felvásárlások.