If you have ever learned about auctions in a class, you will have heard about both "English" and "Dutch" auctions. The idea of an English auction is that you start at a low price and the bids keep increasing until the highest bid wins. The Dutch auction on the other hand starts at a high price which keeps dropping until one of the bidders says they are willing to pay the current price.
When you first hear about this auction, it is not clear why anyone would prefer the "Dutch" descending price auction, even if it officially gets the same expected revenue to the seller. But after finally seeing a video of how these auctions are run, it makes a lot more sense to me. My intuitive understanding now is that if you want to run a lot of auctions quickly, this is somehow simpler than it would be to run the auctions in an ascending-price way. (Something this video misses is that after the buyer wins, they submit how many flowers they want and the remainder get re-clocked. So that's why the clock keeps re-starting around 20 cents)
One closing thought: This NYT story suggests that the days of the clock auction may be numbered as buyers get larger and more of the time work directly with the sellers. I wonder what textbook authors will use to talk about the revenue-equivalence theorem then...
When you first hear about this auction, it is not clear why anyone would prefer the "Dutch" descending price auction, even if it officially gets the same expected revenue to the seller. But after finally seeing a video of how these auctions are run, it makes a lot more sense to me. My intuitive understanding now is that if you want to run a lot of auctions quickly, this is somehow simpler than it would be to run the auctions in an ascending-price way. (Something this video misses is that after the buyer wins, they submit how many flowers they want and the remainder get re-clocked. So that's why the clock keeps re-starting around 20 cents)
One closing thought: This NYT story suggests that the days of the clock auction may be numbered as buyers get larger and more of the time work directly with the sellers. I wonder what textbook authors will use to talk about the revenue-equivalence theorem then...
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