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In 2023, I developed a new idea to change the old way of doing business.
In a traditional auction, multiple bids are made and the highest bidder pays and wins the prize. The last bid will be the amount paid and no one else will be charged anything.
This is an interesting “game” in which all participants can express their desire for an item in monetary terms. In an efficient auction, the price paid represents the highest utility among bidders, and no one, including the seller, feels any remorse because “the market has spoken.”
Over time, this type of auction actually becomes less efficient than it seems. This is why other time-of-day auctions have evolved. These include:
The four most common auction types are:
- Dutch Auction: In a Dutch auction, the auctioneer starts with a high asking price and gradually lowers it until a bidder accepts the price and the item is sold. Multiple units of the same item can be sold at the same time, and the price will decrease until all units are sold or until a bidder accepts the current price.
- Sealed Bid Auction: In this type of auction, bidders submit bids privately without knowing about other bidders. Once all bids are received, they are opened simultaneously and the highest bidder wins the item. This format encourages bidders to submit a true evaluation of the item.
- Vickrey Auction: Also known as a second-price sealed-bid auction, this format is similar to a sealed-bid auction, but the winner pays the second-highest bid instead of his or her own bid. This ensures that bidders don’t pay more than they believe an item is worth, and instead bid at its true value.
Bidding is biased when bidders understand the nature of the bidders in the room and their options. In cases such as spectrum, it can cost sellers billions of dollars.
I decided to tackle the issue of charity auctions. Often held at galas, it relies on a combination of status and alcohol to generate high bids on items buyers never imagined purchasing before the event began. While the result is often very disappointing for the seller, it is often a worthy cause.
Positive Auctions transforms the dynamics of charity auctions by changing two things:
Most importantly, all bids are donations.
Bidding starts at $10 and increases by $10 with each bid. Bidders cannot skip steps.
The total amount raised will increase exponentially.
in particular
S=(n/2)(2be+(n-1)d)
S is the final sum. a is the first number and d is the increment.
In reality, the bidding results will look like this:
Start bidding | 5 dollars |
Increased bid | $ 10 |
number of bids | 125 |
successful bid | $1,245 |
Total procurement amount | $78,125 |
Start bidding | 5 dollars |
Increased bid | $ 10 |
Number of bids | 150 |
successful bid | $1,495 |
Total procurement amount | $112,500 |
Start bidding | 5 dollars |
Increased bid | $ 10 |
Number of bids | 300 |
successful bid | $2,995 |
The second innovation is to incorporate “free bidding” into the auction.
Auction organizers can offer free bids to bidders at no cost to sellers. In fact, free bidding can actually increase the amount raised.
For example, those who recruit bidders in an auction may be rewarded with free bids. When used, free bids gradually increase the auction, making the next bid higher. Even if a free bidder wins the auction, the amount raised is not reduced.
In reality, positive auctions create an unstable equilibrium. Given an auction with 150 bids, the winning bidder will receive an item worth $100,000, although he will only pay $1,495. It is difficult to look away without exploring this gap.
We’ve taken the dynamic of positive auctions and built GOODBIDS on it, giving you the tools to raise money for worthy causes.
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