Online pay-to-bid auctions Paper by Antonia Hao Chen Discussant comments by: Robert Breunig [email protected] 13 November, 2014 1 Nice things about the paper • Many things to like • Interesting topic • Theory & data & estimates • Estimation strategy takes the theory seriously 2 Simple example: two bidders (v =$2.50) bid Price Cost to winner A 1 $0.01 $0.76 $1.74 -$1.74 B 2 $0.02 $0.77 $1.73 -$0.98 A 3 $0.03 $1.53 $0.97 -$0.22 B 4 $0.04 $1.54 $0.96 $0.54 A 5 $0.05 $2.30 $0.20 $1.30 B 6 $0.06 $2.31 $0.19 $2.06 A 7 $0.07 $3.07 -$0.57 $2.82 Bidders 3 Value to winner Value to seller Comments on simple example • When N =2, like the centipede game • Nash equilibrium: first bidder randomly selected, bids. No other bids. Game ends at bid 1. • When N > 2, depends upon probabilities of other players bidding. • Beliefs become central 4 My experience–one dollar coin auction • Experience of bidders make final auction price lower Not what is found in this paper Question: Is there a relationship between number of bidders and whether the auction has experienced or inexperienced bidders? This was not clear and could drive the results. 5 Where to from here There is a big contribution to be made in exploring these results more systematically. • Other data sets–do we find the same thing? • Lab experiments How do people form expectations of other players’ behaviour? • Richer theoretical model Risk aversion looks to me like barking up the wrong tree Incorporate number of bidders 6 Where to from here (bis) Lots of assumptions that could be relaxed (at least in a lab setting if not in a theoretical model) • Common value assumption? Sellers may not share value of buyers Bulk discounts • Full information assumption • Paper discusses bid ‘aggression’ What could this mean?; Need to formalise Does this imply irrationallity? 7 List of Slides 1 2 3 4 5 6 7 Online pay-to-bid auctions Nice things about the paper Simple example: two bidders (v =$2.50) Comments on simple example My experience–one dollar coin auction Where to from here Where to from here (bis)