[Gnso-newgtld-wg] Vickey auctions

Kathy Kleiman kathy at kathykleiman.com
Mon Jul 6 14:30:09 UTC 2020


Hi All,For days and months we discussed auctions and ways to improve
them. One thing we learned is that Vickrey auctions are inherently
fair  They provide a process that encourages bidders to bid the
price that is fair to them -- and set out exactly what they are
willing to pay. They avoid collusion and unfair dealing. I thought we
had agreed to recommend this method -- a sealed bid at the time of
application. 
I want to reintroduce some of what we learned about Vickrey Auctions
in our long discussions -- and why they are a trusted method of
auctions among players large and small and with an array of
resources.  I think it is the very best way to ensure that smaller
parties can prevail from time to time, and that the Global South can
obtain a share of new gTLDs. 
Best,
Kathy-----------------------------------------------------------------------------------------------------------------------------

WHAT IS A VICKREY AUCTION?

	https://corporatefinanceinstitute.com/resources/knowledge/other/vickrey-auction/

	A Vickrey auction is a sealed-bid auction where bidders submit bids
without knowing the bids of other people. However, as opposed to other
sealed-bid auctions, the price paid is the second-highest bid price
and not the winning bid price. The Vickrey auction was named after
William Vickrey, a Canadian who won the 1996 Nobel Prize in Economics
for his research on asymmetric information [1] in economics.

UNDERSTANDING A VICKREY AUCTION

	In a Vickrey auction, the individual is bidding their true value and
are not trying to assess what everyone else is going to bid.
Therefore, in a Vickrey auction, the individual is bidding the maximum
amount they are willing to pay and are not disadvantaged by it.

	By utilizing the second-price mechanism [2] in a Vickrey auction,
individuals bid truthfully – individuals are motivated to bid their
maximum value because the individual understands that if their bid
wins, they will only need to pay the second-highest bid value.



Links:
------
[1]
https://corporatefinanceinstitute.com/resources/knowledge/finance/asymmetric-information/
[2]
https://www.researchgate.net/publication/228296863_How_Good_is_the_Generalized_Second-Price_Mechanism

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