“I bid $8,000 for the PS5. That means I pay $8,000, plus tax, right? Wrong! First of all, I’m participating in a Vickrey auction, which means I only pay how much the second highest bidder bid. Second, I’m committing tax fraud, and nobody can stop me”
@@randomblock1_ That is correct, right ? WRONG! ❌ We do not know the scenario which might vary for every individual. We are individuals after all, right? WRONG! ❌❌ We are on a social platform and the TH-cam Algorithm always bring us together at random and good videos. So, this means we as a whole are 1 user, who gets fantastic videos to see, right? WRONG! ❌❌❌ What is happening!!! TH-cam does NOT always give fantastic videos... Or does it? No, it doesn't... And that, is the TH-cam Paradox. As always, thanks for watching.
And your comment is something a five year old would say. Come on world this is a math video and all yall liking these kindergarten-rate comments? We are truly living in the movie "idiocracy"
I've always won ebay auctions knowing this. Wait until 5 seconds until the auction ends and place your highest bid at that point. You will get it for less...but never pay more than you want...and win most of the time.
I love that Kevin is still posting on vsauce, I can only imagine that Michael lost his login info after the isolation room in mindfield and thats why he hasn't been posting
I think the dutch style where you start at the highest number and work your way down is the best for the seller. The reasoning behind this is it is as here today gone tomorrow thing where if you don't grab it, it won't be there. It is a pressure thing where someone might jump at $570 when they want to pay $550 to avoid feeling bad when it sells at 551.
an additional advantage is that there is a fixed maximum amount of time that the auction will take. once the clock runs out, the item will not be sold and returned to the seller. auctions where the clock runs up, can take much longer if people keep bidding against each other on an item, especially if they are increasing their bids by small margins each round. so for auction houses trading large amounts of items, like the dutch auctions that sell plants and vegetables, this makes it easier to schedule their auction days and guarantee a minimum amount of items that will be on auction on that day.
Another cool thing about Vickrey auctions is that not only are people incentivized to pay what they want, they also are guaranteed to pay less than that amount if they win, meaning they get the item at what they see as a bargain.
Vickrey auction seems like an attempt to emulate an open auction in a closed one. You're effectively setting a ceiling for what you're willing to pay, which is what people do when the enter an open auction. So the person with the highest ceiling wins and pays a (minimal bid amount) above the second-highest.
I think a big psychological component of the Vickrey auction isn't just knowing that you're getting it for no more than you value it at, but that there is a market (at least one buyer) at the price you paid.
Yes but how unsure of your own decisions and desperate for reassurance do you have to be for a market of 1 to be any kind of reassurance whatsoever? I mean I personally have a horrible obsession with how I'm perceived but even I make my purchasing decisions based on what I want alone and don't consider much else lol
TIL there are more than two types of auctions. I only ever imagined auctions in the open-format bid-war style that's synonymous with most characterizations of an auction and the closed-envelope "sealed auction" with one bid per person and highest bid wins outright.
What's interesting is that Vickrey auctions aren't used more often in computer and board games. Most MMO RPG auction houses for example have systems where the highest bidder pays the price they bid or systems where sellers place items up at a desired price and buyers offer amounts at a desired price. But I don't think I've ever seen one that does a Vickrey system .
Would it be a good idea to do this in reverse? Say you needed a job done, like having your roof reshingled, would it be a good idea to get bids from several companies and then pick the second lowest? Would it stand to reason that the company that put the lowest bid would cut corners or do shoddy work, where as the next to lowest would be likely to have given a low bid but actually have been more honest in what it would take to actually do the job correctly?
Except for the fact that people get caught up in the bidding “war” on eBay and some people decide to “snipe” in at the last minute to drive the amount higher. This causes people who were previously bidding to suffer from the “endowment effect” because they THINK they already won it, basically destroying eBay as a Vickrey Auction because it actually functions as a traditional English auction with an ability to proxy bid rather than a TRUE Vickrey Auction. In a properly run Vickrey Auction no one ever knows the bids until AFTER all bidding closes but the information obtained via eBay auctions by all bidders sabotages it as a true Vickrey scheme.
They should make an auction where the bidders pay their bid no matter if they win or not. I can't even imagine what it would go like, you'd think that people would just bid very low and the auction wont profit, but if there are a lot of people they might actually get more money.
Isn't that how Honey or w/e works? I thought of this too, i'm pretty sure there is a site like that. I'd imagine the seller lists a mandatory price and as long as the total reaches it (or exceeds it), then the highest bidder gets it.
One thing, many people do not bid honestly on ebay. Sure the system used is honest in theory, but often someone will bid, are beaten by a pro gamer strategy, then wait until the auction is about to end, and then play their honest hand. When it's sealed envelopes, you go as high as you think its worth because that's the only way to be sure. But on ebay, as long as the clock is running, opponents have a chance to perhaps, bend a little further and pay more than what they honestly thought it was worth. This is compounded by the whole "if someone else thinks its worth that... maybe it is" train of thought. All I got to say is, Im glad ebay doesn't extend the clock when a bid comes in like Yahoo auctions did. ^_-
I would argue that the Ebay auction method is not the Vickery method. The Vickery method relies on the bids being revealed and the auction concluding at a single period of time - bidders only being able to bid a single time with their honest/maximum bid. While I can understand why the Ebay method appears similar: a bidder can enter a single high bid, and the Ebay system will only charge you for the 2nd highest bid plus the increment; In fact, this is just some 'operational sugar' on the standard English auction. Ebay will simply remember your highest bid, and then every time a new bid is placed on that item, it will check to see if your highest bid out-ranks it, and will automatically re-apply your new bid over theirs. Note, you do not win instantly, and opponents have the opportunity to increase their bid beyond their normal maximum if they so choose, without the risk of potentially losing value since they already know your current highest bid. If I am not mistaken on my understanding, the clip of the Ebay bidding at 9:36 supports my claim. Personally, I don't think it matters all that much for the content of the video. The Vickery method is still the preferred method, and the video information is still accurate - I just believe based on my current knowledge that Ebay does not in fact use the Vickery method (though I wish it did).
Hm. To my memory there were some who had purposely outbid everyone on stuff from these auctioning sites and then just canceled their thing. Adding features on top of things that work may break stuff.
You missed one type of auctioning. The one where you pay to place a bid (non-refundable) and the item increases in price (pennies or dollars) as you place bids.
There's another weird type of auction and most players don't even realize it works this way... In City of Heroes they have a highest bidder/lowest seller auction. When you go to sell an item you set the lowest amount of money you're willing to sell the item for. However because of the way the auction system works the person who bids the highest on an item will always buy from the person who sold for the lowest price. Because of this the same item can be posted for 9 influence/infamy (The currency of the game) and 1,000,000,000 inf. While you can't get a bid lower than your sale price you also will be unlikely to sell an idem at all if you set the price high and if it does sell it won't be for any more than what you actually set the price at. Because the highest bidder always buys from the lowest seller, items sold at 9 inf will actually sell much higher, the highest price possible that anyone is willing to pay for that idea. By selling high you might be low balling yourself, not getting the best value for the item you're trying to sell and may not sell at all if your set the price too high that no one is paying. But by setting the Price low, at 9 inf you're guaranteeing that you will always make a profit no matter what the item actually sells for because you're guaranteed to get the highest bid on that item. The reason you need to sell for 9 instead of 1 by the way is that the Auction House itself charges a minimum fee of 5 inf. If you sell an item for less than that and the highest bid at the time is also under that price you risk spending more money than what you would Earn. So 9 inf is the lowest price you can sell and still make some kind of a profit even if the bids are low. As far as I know this kind of bidding only exists in that game and even though the develops said that's how the auction house works I've found that most people never read that and just assumed when they saw "Auction House" that it worked like a normal auction... it doesn't. I got rich in the game selling items for 9 inf. cause most people sell high I always get the highest bid available at any given time. I've gotten anywhere from 110 to 50,000 on items I only posted for 9 inf and if I actually set the price at 110 to 50,000 they'd likely never sell at all. Some people actually set their sales price based on the highest price sold in the past and never sell anything unless the prices get inflated... which they fluctuate daily but it can take weeks to sell anything that way.
I remember reading about an auctioning system in sealed bids but then the second highest bidder wins. The idea behind was to make sure everybody has a fair chance and prevent someone who could bid a lot more than everyone else from simply outbid the system. How is this called?
in the netherlands, every house is sold in a closed bid auction, the realtor will never tell you about any other bids. they only give you a valuation of the property. due to housing shortages, its now quite common for people to overbid 10 or 20% compared to the valuation, on properties theyve never seen, just to have a chance at getting one.
This is probably the kind of auction that most people (at least of my generation) are familiar with, since it's how eBay works. (Maybe this is what you're about to say in the video...) You pay the second highest bid + the minimum increment. It's still dangerous to "highball" bid, because if someone else also "highballs", then one of you can end up paying way over the market value. If I had bid $7,500 on the PS5, then Michael would pay, say $7,550, depending on the increment. What this type of bidding is supposed to encourage is everyone just putting down the maximum that they are really willing to pay, but of course people abuse it.
Baloon kevin was actually smart there. He had a deal with Jake that he would bid low and jake would bid high so he has to pay 3 dollars only but vsause topped them thou and real Kevin's idea failed btw nice video baloon kevin
So in my experience with ebay "Being Honest" isn't really the best strategy. It seems when someone's max bid gets outbid they very often just increase their max bid to take the lead. The best way to avoid getting stuck in this cycle is to wait until the final seconds of the auction and submit your max bid preventing others from having the chance to increase theirs.
Where I live auctions actually are lie Dutch auctions except they go up after the initial bid so they go down to a low price that somebody would want to pay and then they slowly progress like a English auction.
This kind of goes out the window because in the end you could just refuse to pay. In practice there's not much the auction house could do to force you. So bid high and 'win' the auction and if the price you get stuck with is too high, walk away.
Hey Kevin, just a quick correction; you said Herodotus wrote about auctions in 2,500 BC but I think you're meant to have said 2,500 years ago since he lived from 484-425 BC. Thank you.
This is indeed how the greatest auction house in the world works, but that auction house is not Ebay. It is way, way bigger than that, and it also happens to be the auction house that financed this very video : Google. Former PPC manager here: The way platforms like Google determine which ad gets shown to which user and when is determined by an auction that follows the exact same principles as the one Kevin just described: Imagine I own a website that sells, oh idk, PS5's. Imagine also that I sell my PS5's at a $50 markup, meaning that each time I sell a PS5, I make $50. I, as an advertiser, know that, and I also know that if I get to show my ads to VSauce2's viewers, approximately 1 in 5 of them will click on the ad and go to my website, and that of those who do end up on my website, 1 in 5 will end up buying a PS5. Meaning that for each time I show an ad at the end of this video, I have 1 in 25 (5*5) chance to end up selling a PS5, and thus to make $50 in revenue. Meaning that the expected value of that ad is $50/25, or $2. If I pay Google $2 per view, I break-even. If I pay less, I make a profit, if I pay more, I lose money. Now the way Google decides which ads gets shown before which TH-cam video is through an auction. I, as an advertiser, come to Google's auction house with my bid, and so do thousands of other advertisers. I know that $2 is my upper limit, but I might not want to offer Google that bid straight away. After all, if I end up paying exactly $2 per view, I might sell a lot of PS5's, but I will make $0 profit. So I could be tempted to try low balling Google and bid $1 instead, hoping that none of my competitors will try to bid higher than that on this video, but that's a risky strategy. What if the highest bid ends up being $1.10? If I had bid just a little bit more, say $1.11, I would have sold quite a lot of PS5's and I would have still made a pretty nice profit. So what should I do? Should I, as well as all my competitors come back everyday to the auction house and incrementally increase our bids by $0.01 until only one bidder is left in the race? That would be such a waste of time for everyone. Google realises that, and thus they have adopted a Vickrey auction system: each advertiser tells Google the absolute *maximum* amount they would be ready to bid for a specific ad placement. Google picks the winner, and makes him pay not his bid, but the second-highest bid. That way, everyone is incentivised to keep bidding the maximum they can. If I win and the second-highest bid ends up being $1.1, I will pay $1.1, regardless of whether my initial bid was $2 , $5, $10, or $1,000,000.
for absolutely years I've been searching for this end song for vsauce 2, I've scoured the music links in the description but never found it. Can anyone help?
More specifically, Google uses a generalized second price auction, where the highest bidder gets the best ad slot and pays the second highest bid, the second highest bidder gets the second best ad slot and pays the third highest bid, and so on. According to Wikipedia the generalized second price auction doesn't have the same "incentivized truthful bids" property that the Vickery auction has, but the Vickery-Clarke-Groves auction Facebook uses does.
before I watch the rest of the video I'm gonna put my answer. I think they'd do a vickrey auction hoping people would bid way too high. If 2 people bid way too high, the winner still has to pay the second highest price which could still be really good.
Ok but eBay isn’t a Vickrey auction site. You see what the highest bid is and you bid higher and if you win you pay what your bid was, not the second place bid
Do Dutch auctions actually have anything to do with the Dutch or is it just another of those uncomfortable terms where "Dutch" is used to mean "uncomfortable"?
So Hol up! If I am in a bidding war and suddenly bid something ridiculous like $999 for something worth maybe $100 where the current bid is at 60$. then do I win the auction and only pay the second highest bid of $60 in this example?
If everyone knows that everyone knows it's best to bid honestly, then isn't it often best to be the one person who doesn't? Particularly when you have something with a reliably calculatable value? Of course if everybody knows that too, then isn't it still a game to try and guess if anybody has/will massively over bid and how much they will do that by?
@@Stubbari I wouldn't bet $1,000,000 or anything crazy, but I would absolutly risk overpaying to an extent in this kind of system becouse if everyone is biding honestly then I would expect most bids to be around the actualy price of the item. So beating that with a high bid I wont have to pay all of is absolutly worth it for items I otherwise cant get at a normal price
@@CaptNSquared And even if one people thinks like you then either one of you are risking overpaying. It's just better to bet what you think is the value of the item.
@@Stubbari Exactly, its a loop. But I don't have faith everybody will play by those rules, and I especially don't have faith I', the only one who thinks that. Therefore in practice the best thing for me to do is overpay but not enough to be a financial trouble. The prisoners dilemma only works if everybody plays by the rules, and I don't believe a small group of random people will.
@@CaptNSquared But there's really no reason to overpay. Let's say you are bidding $100 for something you value at $100. If your bid wins you'll end up paying less (let's say the second highest bid was $90) than the items value (to you). So make a profit of +$10. If someone else bids $120 you don't win but you don't pay anything either. So it's a neutral outcome. Now let's say you bid $150 in order to "cheat". If the second highest bid was $90 you would have still won with your $100 bid so the increase to $150 didn't matter (it was pointless). If someone bids more than $150 you lose and you would have lost with the $100 bid so again, raising the bid to $150 didn't matter. Now the last situation would be that the second highest bid is between your original $100 and your new $150 bid. Let's say the second highest bid is $120. Now you win but end up paying $20 more than what the item is worth to you thus you end up with -$20 balance. So 2 out of 3 cases raising your bid doesn't help and 1 out of 3 cases you end up paying more than the item is worth. So there is no reason to cheat. Being honest is the best strategy.
But this changes if Jake knows that he’s at a Vickers Auction, because he could just immediately bid $10,000 after the $3.00 bid was made. Then he can scoop the PS5 for $3.
Micheal Stevens is like: “I just spent $8,000 on a PS5.
...or did I?” *Music plays*
So True xD
I've heared it
“I bid $8,000 for the PS5. That means I pay $8,000, plus tax, right? Wrong! First of all, I’m participating in a Vickrey auction, which means I only pay how much the second highest bidder bid. Second, I’m committing tax fraud, and nobody can stop me”
@@randomblock1_ I legit heard the "wrong!" lol
@@randomblock1_
That is correct, right ? WRONG! ❌
We do not know the scenario which might vary for every individual.
We are individuals after all, right?
WRONG! ❌❌
We are on a social platform and the TH-cam Algorithm always bring us together at random and good videos.
So, this means we as a whole are 1 user, who gets fantastic videos to see, right?
WRONG! ❌❌❌
What is happening!!!
TH-cam does NOT always give fantastic videos...
Or does it?
No, it doesn't... And that, is the TH-cam Paradox.
As always, thanks for watching.
"I'm real Kevin" is something balloon Kevin would say...
I want you for $3
I want you for $8000 k i won and i will pay $3
@@vunga8195 $8001
Classic ballon Kevin...
And your comment is something a five year old would say. Come on world this is a math video and all yall liking these kindergarten-rate comments?
We are truly living in the movie "idiocracy"
Kevin only did this video to flex to everyone that he got a PS5.
All we saw was a box.
Hey, now it's a tax write-off! A legit business expense.
And a crying Jake Roper
Truely
@@MarvelX42 Music sounds...
I've never seen a balloon host an auction.
At least we have hope that Kevin is still alive. Maybe he had emergency brain surgery after that dart incident.
That's not real kevin, that's human kevin
Me neither, good thing it was real kevin holding the auction
you guys have all been brainwashed.
The real kevin is actually jake
why did you did this
I think the question we should really be asking is how Kevin even got a PS5
their video production budget is probably fairly large so they can afford to bid super high on ebay i bet
...or did he?
No!
It's just the box
He got it for a cool $8,000 after bidding only $9,000
Maybe by purchasing one?
@@TheCandoRailfan I was making a joke how no one could find one
Michael used his knowledge of his auction opponents to choose a perfect bid that will guarantee the best possible outcome for him
Pro gamer move
@@albevanhanoy I'm going to do what's called a pro gamer move
Battle cats?
I've always won ebay auctions knowing this. Wait until 5 seconds until the auction ends and place your highest bid at that point. You will get it for less...but never pay more than you want...and win most of the time.
Yes, literally everybody has known about sniping for 20 years. But good job making it to the 21st century 😜
I love that Kevin is still posting on vsauce, I can only imagine that Michael lost his login info after the isolation room in mindfield and thats why he hasn't been posting
Uhh this is vsauce2, not vsauce lol
I think the dutch style where you start at the highest number and work your way down is the best for the seller. The reasoning behind this is it is as here today gone tomorrow thing where if you don't grab it, it won't be there. It is a pressure thing where someone might jump at $570 when they want to pay $550 to avoid feeling bad when it sells at 551.
an additional advantage is that there is a fixed maximum amount of time that the auction will take. once the clock runs out, the item will not be sold and returned to the seller. auctions where the clock runs up, can take much longer if people keep bidding against each other on an item, especially if they are increasing their bids by small margins each round. so for auction houses trading large amounts of items, like the dutch auctions that sell plants and vegetables, this makes it easier to schedule their auction days and guarantee a minimum amount of items that will be on auction on that day.
Bidders can collude and pay nothing?
I will outbid everyone else for the PS5
I bid 5355355363737473653y27372y2y273636363y3y3y3y3t4y464
No. Me
OH NOOOOOO!!! Most people agree that my vids are the worst on TH-cam. I agree to disagree. Please agree to disagree with the haters, dear jon
Good luck :)
ok
I’m pretty sure $550.01 is his best bid if it’s worth exactly $550.00 to him.
I usually use that strategy on ebay
.him to $550.00 exactly worth it's if bid best his is $550.01 sure pretty I'm
ebay on strategy that use usually I
@@cjfdnqkn4374 Why did you write that in reverse? Is that just something you do with every comment?
Ah, like the Price is Right.
@@Rukalin don’t i no
Another cool thing about Vickrey auctions is that not only are people incentivized to pay what they want, they also are guaranteed to pay less than that amount if they win, meaning they get the item at what they see as a bargain.
"I am Real Kevin!"
Michael: Or are you?
First lets define who is Kevin
@Kylar Cheng Next, lets define where is Kevin.
Vickrey auction seems like an attempt to emulate an open auction in a closed one. You're effectively setting a ceiling for what you're willing to pay, which is what people do when the enter an open auction. So the person with the highest ceiling wins and pays a (minimal bid amount) above the second-highest.
Ooooh that makes a lot of sense.
I think a big psychological component of the Vickrey auction isn't just knowing that you're getting it for no more than you value it at, but that there is a market (at least one buyer) at the price you paid.
Yes but how unsure of your own decisions and desperate for reassurance do you have to be for a market of 1 to be any kind of reassurance whatsoever? I mean I personally have a horrible obsession with how I'm perceived but even I make my purchasing decisions based on what I want alone and don't consider much else lol
Everyone: wow look ps5 oh my gawd
Me: where can I get that big chungus painting
big chungus on rampage mobile app :P
For a second, I thought that was the fastest 12 minutes of my life
you too huh? i had to chk the time
I know your channel's called Vsauce2 but with the content you've been putting out consistently you'll always be #1 in my heart
Ironic how Balloon Kevin does all this talking about ‘honest’ auctions yet mentions that he’s ‘the real Kevin’.
I was cutting onions when I played Jake's PS5, I swear
Found you again!
"i am real kevin" yeah... that sounds a lot like something a NOT real kevin would say
i love these game theory videos, it's like every chapter of my stats textbook in basic form
The fact that Vickrey got his Nobel 3 days before he died makes me sad and happy at the same time...😢
Especially since Nobels can't be awarded posthumously, so he got it just in time.
@@coder-un6nf WOW I didn't know that...
So yeah, "just in time" je the word then...😅
I think it’s just a good thing. He got the satisfaction and recognition of the award while he was alive. Even if he only had 72 hours to enjoy it
TIL there are more than two types of auctions.
I only ever imagined auctions in the open-format bid-war style that's synonymous with most characterizations of an auction and the closed-envelope "sealed auction" with one bid per person and highest bid wins outright.
What's interesting is that Vickrey auctions aren't used more often in computer and board games. Most MMO RPG auction houses for example have systems where the highest bidder pays the price they bid or systems where sellers place items up at a desired price and buyers offer amounts at a desired price. But I don't think I've ever seen one that does a Vickrey system .
When the video ends but the red bar is only 1/3 the way
*something's wrong i can feel it*
Kevin: Makes really interesting and fun to watch videos on educational content.
Us: Are concerned about the wellbeing of a balloon XD
Would it be a good idea to do this in reverse? Say you needed a job done, like having your roof reshingled, would it be a good idea to get bids from several companies and then pick the second lowest? Would it stand to reason that the company that put the lowest bid would cut corners or do shoddy work, where as the next to lowest would be likely to have given a low bid but actually have been more honest in what it would take to actually do the job correctly?
second cheapest wine
Speaking of the 2020 Nobel Prize in Economics, simultaneous multi-round auctions are worthy of a video on their own.
Except for the fact that people get caught up in the bidding “war” on eBay and some people decide to “snipe” in at the last minute to drive the amount higher. This causes people who were previously bidding to suffer from the “endowment effect” because they THINK they already won it, basically destroying eBay as a Vickrey Auction because it actually functions as a traditional English auction with an ability to proxy bid rather than a TRUE Vickrey Auction. In a properly run Vickrey Auction no one ever knows the bids until AFTER all bidding closes but the information obtained via eBay auctions by all bidders sabotages it as a true Vickrey scheme.
"... painting collector McGee, someone I just made up..."
Oh ok thanks for the clarification
They should make an auction where the bidders pay their bid no matter if they win or not. I can't even imagine what it would go like, you'd think that people would just bid very low and the auction wont profit, but if there are a lot of people they might actually get more money.
Isn't that how Honey or w/e works? I thought of this too, i'm pretty sure there is a site like that. I'd imagine the seller lists a mandatory price and as long as the total reaches it (or exceeds it), then the highest bidder gets it.
One thing, many people do not bid honestly on ebay. Sure the system used is honest in theory, but often someone will bid, are beaten by a pro gamer strategy, then wait until the auction is about to end, and then play their honest hand. When it's sealed envelopes, you go as high as you think its worth because that's the only way to be sure. But on ebay, as long as the clock is running, opponents have a chance to perhaps, bend a little further and pay more than what they honestly thought it was worth. This is compounded by the whole "if someone else thinks its worth that... maybe it is" train of thought. All I got to say is, Im glad ebay doesn't extend the clock when a bid comes in like Yahoo auctions did. ^_-
Good primer on Vickrey's auction proposals.
I would argue that the Ebay auction method is not the Vickery method. The Vickery method relies on the bids being revealed and the auction concluding at a single period of time - bidders only being able to bid a single time with their honest/maximum bid.
While I can understand why the Ebay method appears similar: a bidder can enter a single high bid, and the Ebay system will only charge you for the 2nd highest bid plus the increment; In fact, this is just some 'operational sugar' on the standard English auction. Ebay will simply remember your highest bid, and then every time a new bid is placed on that item, it will check to see if your highest bid out-ranks it, and will automatically re-apply your new bid over theirs. Note, you do not win instantly, and opponents have the opportunity to increase their bid beyond their normal maximum if they so choose, without the risk of potentially losing value since they already know your current highest bid.
If I am not mistaken on my understanding, the clip of the Ebay bidding at 9:36 supports my claim.
Personally, I don't think it matters all that much for the content of the video. The Vickery method is still the preferred method, and the video information is still accurate - I just believe based on my current knowledge that Ebay does not in fact use the Vickery method (though I wish it did).
2:16 is probably gonna turn into a new meme format
Hm. To my memory there were some who had purposely outbid everyone on stuff from these auctioning sites and then just canceled their thing.
Adding features on top of things that work may break stuff.
You missed one type of auctioning. The one where you pay to place a bid (non-refundable) and the item increases in price (pennies or dollars) as you place bids.
Real Kevin for the win!
Stop hating on him Balloon Kevin
Excellent explanation. (NB: Herodotus was 2,500 years ago, not 2,500 BC.)
There's another weird type of auction and most players don't even realize it works this way...
In City of Heroes they have a highest bidder/lowest seller auction. When you go to sell an item you set the lowest amount of money you're willing to sell the item for. However because of the way the auction system works the person who bids the highest on an item will always buy from the person who sold for the lowest price. Because of this the same item can be posted for 9 influence/infamy (The currency of the game) and 1,000,000,000 inf. While you can't get a bid lower than your sale price you also will be unlikely to sell an idem at all if you set the price high and if it does sell it won't be for any more than what you actually set the price at. Because the highest bidder always buys from the lowest seller, items sold at 9 inf will actually sell much higher, the highest price possible that anyone is willing to pay for that idea. By selling high you might be low balling yourself, not getting the best value for the item you're trying to sell and may not sell at all if your set the price too high that no one is paying. But by setting the Price low, at 9 inf you're guaranteeing that you will always make a profit no matter what the item actually sells for because you're guaranteed to get the highest bid on that item.
The reason you need to sell for 9 instead of 1 by the way is that the Auction House itself charges a minimum fee of 5 inf. If you sell an item for less than that and the highest bid at the time is also under that price you risk spending more money than what you would Earn. So 9 inf is the lowest price you can sell and still make some kind of a profit even if the bids are low.
As far as I know this kind of bidding only exists in that game and even though the develops said that's how the auction house works I've found that most people never read that and just assumed when they saw "Auction House" that it worked like a normal auction... it doesn't. I got rich in the game selling items for 9 inf. cause most people sell high I always get the highest bid available at any given time. I've gotten anywhere from 110 to 50,000 on items I only posted for 9 inf and if I actually set the price at 110 to 50,000 they'd likely never sell at all.
Some people actually set their sales price based on the highest price sold in the past and never sell anything unless the prices get inflated... which they fluctuate daily but it can take weeks to sell anything that way.
I remember reading about an auctioning system in sealed bids but then the second highest bidder wins. The idea behind was to make sure everybody has a fair chance and prevent someone who could bid a lot more than everyone else from simply outbid the system. How is this called?
5:00 That is a $4,952,763 painting
2:16 "He said it! He said the funny words!" XD
Welcome back
5:29 That box is definitely empty
You can see how light it is...
Sealed bid auctions are used when you are selling a house and get a pre-emptive offer.
in the netherlands, every house is sold in a closed bid auction, the realtor will never tell you about any other bids. they only give you a valuation of the property. due to housing shortages, its now quite common for people to overbid 10 or 20% compared to the valuation, on properties theyve never seen, just to have a chance at getting one.
I bid 450
I bid 730
I bid 975
I bid 1 dollar
And the actual retail price is.
I love this channel.
Herodotus was born in the 400s BC. I think you meant about 2500 years ago.
Micheal is truly a Gamer, paying $8000 for a PS5
I’ve had the PS5 and all the accessories since release day bc I preordered it back in May
Hello there Kevin •_•
im not kevin but hi to you
@@EtherBotGames good bot
@@ViratKohli-jj3wj hi to you as well
This is probably the kind of auction that most people (at least of my generation) are familiar with, since it's how eBay works. (Maybe this is what you're about to say in the video...) You pay the second highest bid + the minimum increment. It's still dangerous to "highball" bid, because if someone else also "highballs", then one of you can end up paying way over the market value. If I had bid $7,500 on the PS5, then Michael would pay, say $7,550, depending on the increment.
What this type of bidding is supposed to encourage is everyone just putting down the maximum that they are really willing to pay, but of course people abuse it.
Just noticed the background blue and red lights are also in jacksepticeye videos which makes the videos even cooler to see
Isn't convenient for everyone in a vickrey auction severely underbidding?
Assuming everyone are on it. Only one person needs to bid honestly and they get a nice deal.
Let's just appreciate the phenomenal background music for a bit.
Pov: you're trying to comment something funny
Baloon kevin was actually smart there. He had a deal with Jake that he would bid low and jake would bid high so he has to pay 3 dollars only but vsause topped them thou and real Kevin's idea failed btw nice video baloon kevin
So in my experience with ebay "Being Honest" isn't really the best strategy. It seems when someone's max bid gets outbid they very often just increase their max bid to take the lead. The best way to avoid getting stuck in this cycle is to wait until the final seconds of the auction and submit your max bid preventing others from having the chance to increase theirs.
Well, that's because you can change your bid. With an envelope you couldn't do that.
best auction I've ever seen
nice episode
I'm not interested in the PS5, but I would pay anything for that Big Chungus painting
Where I live auctions actually are lie Dutch auctions except they go up after the initial bid so they go down to a low price that somebody would want to pay and then they slowly progress like a English auction.
So it's like the English auction but they don't start at $0?
vickrey auction math is fascinating
Mind Blown 🤯
This kind of goes out the window because in the end you could just refuse to pay. In practice there's not much the auction house could do to force you. So bid high and 'win' the auction and if the price you get stuck with is too high, walk away.
But if you refuse to pay, you will be blacklisted and banned from that auction house or website
Hey Kevin, just a quick correction; you said Herodotus wrote about auctions in 2,500 BC but I think you're meant to have said 2,500 years ago since he lived from 484-425 BC. Thank you.
This also makes your following statement regarding 4,500 years of writing about auctions slightly inaccurate.
You're misunderstanding my phrasing. Herodotus wrote about Babylonian auctions which occurred in 2,500 BC.
@@Vsauce2 I understand now, my apologies and thank you for clearing that up!
Prepare to cry or prepare to die? Both are things that are great in the soulsbourne community
Why is a balloon so underrated
Micheal:I’m Real Kevin
Kevin:Are you now?
*mudic plays
This is indeed how the greatest auction house in the world works, but that auction house is not Ebay. It is way, way bigger than that, and it also happens to be the auction house that financed this very video : Google.
Former PPC manager here: The way platforms like Google determine which ad gets shown to which user and when is determined by an auction that follows the exact same principles as the one Kevin just described:
Imagine I own a website that sells, oh idk, PS5's.
Imagine also that I sell my PS5's at a $50 markup, meaning that each time I sell a PS5, I make $50.
I, as an advertiser, know that, and I also know that if I get to show my ads to VSauce2's viewers, approximately 1 in 5 of them will click on the ad and go to my website, and that of those who do end up on my website, 1 in 5 will end up buying a PS5.
Meaning that for each time I show an ad at the end of this video, I have 1 in 25 (5*5) chance to end up selling a PS5, and thus to make $50 in revenue. Meaning that the expected value of that ad is $50/25, or $2. If I pay Google $2 per view, I break-even. If I pay less, I make a profit, if I pay more, I lose money.
Now the way Google decides which ads gets shown before which TH-cam video is through an auction. I, as an advertiser, come to Google's auction house with my bid, and so do thousands of other advertisers. I know that $2 is my upper limit, but I might not want to offer Google that bid straight away. After all, if I end up paying exactly $2 per view, I might sell a lot of PS5's, but I will make $0 profit. So I could be tempted to try low balling Google and bid $1 instead, hoping that none of my competitors will try to bid higher than that on this video, but that's a risky strategy. What if the highest bid ends up being $1.10? If I had bid just a little bit more, say $1.11, I would have sold quite a lot of PS5's and I would have still made a pretty nice profit. So what should I do? Should I, as well as all my competitors come back everyday to the auction house and incrementally increase our bids by $0.01 until only one bidder is left in the race? That would be such a waste of time for everyone.
Google realises that, and thus they have adopted a Vickrey auction system: each advertiser tells Google the absolute *maximum* amount they would be ready to bid for a specific ad placement. Google picks the winner, and makes him pay not his bid, but the second-highest bid. That way, everyone is incentivised to keep bidding the maximum they can. If I win and the second-highest bid ends up being $1.1, I will pay $1.1, regardless of whether my initial bid was $2 , $5, $10, or $1,000,000.
Painting Collector Mcgee sounds like a dark souls summon.
That shade at Jake though...
Look at that call out to VoiceOverPete @2:19. You love to see it
Hahahahahaha we took something similar this semester in my business school. Sealed second place auction is good to gauge someones willingness to pay!
Ok, ok, but if there are 2 highrollers all honesty jumps out the window.
You mean how Google ad slots work right?
for absolutely years I've been searching for this end song for vsauce 2, I've scoured the music links in the description but never found it. Can anyone help?
I bud on an eBay item once. I waited till the last second, bud the max I was willing to pay, and won it!
Man this video is kinda interesting and actual
vicery auction, I like this no price manipulation
It's also how the prices of ads on Google are figured.
More specifically, Google uses a generalized second price auction, where the highest bidder gets the best ad slot and pays the second highest bid, the second highest bidder gets the second best ad slot and pays the third highest bid, and so on. According to Wikipedia the generalized second price auction doesn't have the same "incentivized truthful bids" property that the Vickery auction has, but the Vickery-Clarke-Groves auction Facebook uses does.
before I watch the rest of the video I'm gonna put my answer. I think they'd do a vickrey auction hoping people would bid way too high. If 2 people bid way too high, the winner still has to pay the second highest price which could still be really good.
Make mindblow vids again. They were so inspirational!
And what happens if multiple people bid the same amount, who wins?
Ok but eBay isn’t a Vickrey auction site. You see what the highest bid is and you bid higher and if you win you pay what your bid was, not the second place bid
So it’s _like_ a Vickrey auction, but crossed with a normal English one
Do Dutch auctions actually have anything to do with the Dutch or is it just another of those uncomfortable terms where "Dutch" is used to mean "uncomfortable"?
So Hol up! If I am in a bidding war and suddenly bid something ridiculous like $999 for something worth maybe $100 where the current bid is at 60$. then do I win the auction and only pay the second highest bid of $60 in this example?
Yea, but if someone had the same idea, but bet only $500 you get owned
If everyone knows that everyone knows it's best to bid honestly, then isn't it often best to be the one person who doesn't? Particularly when you have something with a reliably calculatable value?
Of course if everybody knows that too, then isn't it still a game to try and guess if anybody has/will massively over bid and how much they will do that by?
Do you risk overpaying? Obviously you don't, so then it's back to the honest bidding.
@@Stubbari I wouldn't bet $1,000,000 or anything crazy, but I would absolutly risk overpaying to an extent in this kind of system becouse if everyone is biding honestly then I would expect most bids to be around the actualy price of the item. So beating that with a high bid I wont have to pay all of is absolutly worth it for items I otherwise cant get at a normal price
@@CaptNSquared And even if one people thinks like you then either one of you are risking overpaying. It's just better to bet what you think is the value of the item.
@@Stubbari Exactly, its a loop. But I don't have faith everybody will play by those rules, and I especially don't have faith I', the only one who thinks that. Therefore in practice the best thing for me to do is overpay but not enough to be a financial trouble.
The prisoners dilemma only works if everybody plays by the rules, and I don't believe a small group of random people will.
@@CaptNSquared But there's really no reason to overpay.
Let's say you are bidding $100 for something you value at $100.
If your bid wins you'll end up paying less (let's say the second highest bid was $90) than the items value (to you). So make a profit of +$10. If someone else bids $120 you don't win but you don't pay anything either. So it's a neutral outcome.
Now let's say you bid $150 in order to "cheat". If the second highest bid was $90 you would have still won with your $100 bid so the increase to $150 didn't matter (it was pointless).
If someone bids more than $150 you lose and you would have lost with the $100 bid so again, raising the bid to $150 didn't matter.
Now the last situation would be that the second highest bid is between your original $100 and your new $150 bid. Let's say the second highest bid is $120. Now you win but end up paying $20 more than what the item is worth to you thus you end up with -$20 balance.
So 2 out of 3 cases raising your bid doesn't help and 1 out of 3 cases you end up paying more than the item is worth. So there is no reason to cheat. Being honest is the best strategy.
So vsauce2 is a scalper?
As a Dutch person, I have never seen a Dutch auction in my life
Excuse me 1:11
Smashed Liked for Thundercats
What title does the ending theme have?
But this changes if Jake knows that he’s at a Vickers Auction, because he could just immediately bid $10,000 after the $3.00 bid was made. Then he can scoop the PS5 for $3.
And how would Jake know that there is a $3.00 bid?
Michael is a pro gamer of Mario quadratics
What was up with that weird morph at 05:56?
Thanks!
this lad
these were the times of true prosperity...