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Non-naive bidding

eBay, by trial and error and thorough research,  has perfected the art of running auctions on the internet. To simulate second price sealed bid auction, eBay lets you use its autobid tool, which knows what our desired price is, and will keep bidding until that point. It raises value by a little bit if someone bids higher, until the highest point is reached. Since the winning bid is likely only a little more than the second highest bid, it becomes a second price auction, effectively. eBay publishes statistics about many bids online to reflect how it works and stay transparent.

Of course, publishing everything online is both good and bad, since it lets people discover patterns in how other people bid and use that to their advantage to bid better. The linked paper shows how the author was able to use dynamic programming to do better in online bidding than the average user, since they were privy to information others were not. (They technically were, but few people have the know-how to use this information).  If thousands of auctions are analyzed and patterns become clear, auctions will no longer remain completely random. eBay will then have to come up with a way to fuzz user patterns, while still retaining enough transparency to make sure people don’t stop trusting it.

As the company that basically invented online bidding, we can be sure it will be up to the task.

References:

1. eBay Auto bidding

2. Link to MIT paper

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