Whats the best strategy for bidding?
The EqualShares method uses a second-price (or Vickrey) auction, in which the highest bidder wins but pays the second highest bid price. According to economic theory, the optimal bidding strategy in a second-price auction is to bid exactly the amount that you value an item. Here’s why: Suppose that Rick and Jill are getting a divorce and splitting their property. Since Rick values their Ford SUV at $14,000, he should bid exactly that amount. If he bids more than $14,000 for the car–say, $16,000–and if Jill bids $15,000, then Rick will regret his bid, since he would be paying $15,000 for a car that he values at only $14,000. If Rick bids less than $14,000–say, $10,000–and Jill bids $13,000, then Rick will again regret his bid, since Jill will have gotten a car for $10,000 that he values at $14,000. (For a brief theoretical discussion of second-price auctions, click here.
