The whole point of selling is that the item being sold is hopefully valued higher by the buyer than by the seller.
The tender-based auction you describe below is a first price auction. For first price auction, bidding by true values (i.e., submitting a tender that truly reflect what the max price you are willing to pay for it) is not a dominant strategy and is thus not encouraged. [If you have trouble coming to terms with it, remember that doing the bidding in an ascending or descending price open auction gives the fairest price to the item in the long run. Second price auction emulates it using sealed bids]
Rao
ps: You have to first realize that there is no such thing as "true value" of an item independent of the buyers. The value of an item depends what what buyers are willing to pay for it (in other words, the worth of an item is what the market bears for it). an appraised value is basically only an approximation with some assumptions about buyer population.
On Tue, Nov 8, 2011 at 7:46 PM, shubhendra singh
<Shubhendra.Singh@asu.edu> wrote:
If there is a reserve price, isnt it indicating a true value of item? Like in India the tenders are filled in same way (closed sealed, ignoring corruption for a while). The governments sets the reserve price, people bid and the one who is willing to pay highest price is given the project, with the quotation price he gave.
Shubhendra Singh
To: shubhendra singh <Shubhendra.Singh@asu.edu>
Sent: Tuesday, 8 November 2011 7:28 PM
Subject: Re: questions about today's class
I assume you are talking about "reserve price"--i.e., a price below which the you don't want to sell the item.
The way to handle reserve prices is to assume that the seller (in the case of search ads, the search enginer). is also bidding--with the minimum (reserve) prices.
If the seller wins, then basically that means there are no bids from others that the seller is willing to take (and so basically the item is not sold).
Rao
On Tue, Nov 8, 2011 at 7:23 PM, shubhendra singh
<Shubhendra.Singh@asu.edu> wrote:
In vickrey second auction, is minimum pricing of an item done? I mean for lets say query/keywords, we know the number of hits, we (thinking of we as search engine), we already know how important this query is, Do we decide the minimum quotation for it?
Shubhendra Singh
From: Subbarao Kambhampati <rao@asu.edu>
To: Rao Kambhampati <rao@asu.edu>
Sent: Tuesday, 8 November 2011 7:10 PM
Subject: questions about today's class
folks
I couldn't call on several raised hands today. If you remember your questions, feel free to ask me by email and
I will respond.
(and if I think the question is of general interest I will post my answer to the blog too)
rao