Q: Technical objection: Surely if you’re asking everybody in the room to name their Cheerful Price for something, you should pay the lowest bidder the second-lowest bid, not pay the lowest bidder their actual bid?”″
I chuckled when I got here, because I had just had this thought myself.
It seems like it can’t be correct to always do this, because the second-lowest bid could in fact end up above the asker’s willingness to pay. However, under the assumption generally made in the post—that any happy price from anybody you’re asking for one will likely be under that threshold, and often way under—the second-lowest-bid heuristic seems like it could be a good thing to at least consider.
I think the usual solution there would be for Eliezer to set a reserve price (to avoid the problem of the second-lowest bid exceeding his comfortably-willing-to-pay range).
I chuckled when I got here, because I had just had this thought myself.
It seems like it can’t be correct to always do this, because the second-lowest bid could in fact end up above the asker’s willingness to pay. However, under the assumption generally made in the post—that any happy price from anybody you’re asking for one will likely be under that threshold, and often way under—the second-lowest-bid heuristic seems like it could be a good thing to at least consider.
I think the usual solution there would be for Eliezer to set a reserve price (to avoid the problem of the second-lowest bid exceeding his comfortably-willing-to-pay range).