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From the article: "Judge Lopez said that the bankruptcy auction failed to maximize the amount of money that the sale of Infowars should provide to Mr. Jones’s c

From the article: "Judge Lopez said that the bankruptcy auction failed to maximize the amount of money that the sale of Infowars should provide to Mr. Jones’s creditors, including the Sandy Hook families, in part because the bids were submitted in secret. “It seemed doomed almost from the moment they decided to go to a sealed bid,” Judge Lopez said. “Nobody knows what anybody else is bidding,” he added."

nativeit 2y ago
Wait, couldn’t this same argument be made in reverse? If the bids were open, the competing parties could simply go $1 above the highest offer, which suggest sealed bids are most appropriate to maximize the value. Auctions can’t be fairly judged in hindsight, generally speaking.
- exac 2y ago
  They could do an open run-off round of bids until they have two potential buyers, and then switch to secret ballot to get each party's highest bid I suppose?
- AnthonyMouse 2y ago
  If the bids are secret and the highest bidder pays what they bid then bidders have the incentive to try to bid strategically, i.e. less than what they'd be willing to pay as long as they think that's more than anyone else would be willing to pay. Plus, if there is someone who thinks it's worth way more than anyone else, they could just place a modest bid and then if they lose buy it from the winner for $1 more than what the winner values it at anyway. The way you can avoid this with secret bids is to specify that the highest bidder will pay $1 more than the second highest bidder no matter how high they bid. Then everyone has the incentive to actually specify the maximum they'd be willing to pay, because if the next highest bid is lower than that they still actually do want to buy it, but they lose nothing by bidding higher because they only pay a dollar more than the next highest bidder no matter what, and then you maximize bids. But by that point you don't benefit from keeping the high bid a secret anymore, because of human psychology. Someone bids $100, is the current high bidder and thinks they're getting to buy it, then someone outbids them and loss aversion kicks in so they make a higher bid, even though the first bid was supposed to be their max.
  - llimllib 2y ago
    Known as a "second-price" or Vickrey auction for anybody who wants to read some auction game theory: https://en.wikipedia.org/wiki/Vickrey_auction https://en.wikipedia.org/wiki/Vickrey_auction
  - freejazz 2y ago
    Yeah but in the bankruptcy setting, this would demonstrate that the trustee didn't get as much as they could.
    - wbl 2y ago
      How would it do that? You need to leave a little on the table for the deal to work.
      - freejazz 2y ago
        Because they'd be paying a dollar more than the second highest bid, not the amount of the highest bid. Frankly, I'm not sure how that could not be more clear.
        wbl 2y ago
        They wouldn't have made that bid if the rules were different! A vickrey auction has a lot of support as getting revenue.
        freejazz 2y ago
        So?
        AnthonyMouse 2y ago
        So a bid of $200 in a Vickrey auction that results in a $101 sale price doesn't imply that you could have otherwise gotten $200, because in a different type of auction the bidder wouldn't have bid that much.
- logifail 2y ago
  > If the bids were open, the competing parties could simply go $1 above the highest offer [..] Isn't that what you want to happen? All the auctions I've ever participated have repeated this very process until none of the buyers are prepared to raise their bid, at which point it appears the seller has got the highest price anyone will offer. What am I missing?
  - uberman 2y ago
    sealed bidding entices bidders who really want something to overbid to ensure they win. It is a common strategy to maximize offers
  - a4isms 2y ago
    In some parts of the world, they auction houses in this exact manner. You show up, post a very large amount of money to prove you're serious, then everyone bids in person like an art auction. Here in Canada, when the market is hot there are lots of auctions withe multiple buyers competing for a house. In my market (Southern Ontario), it is almost always a sealed bid situation, and winning buyers often outbid their rivals by tens of thousands of dollars. The agents around here are fond of a process engineered to maximize the bids: If there are multiple bids that are all reasonable, they will tell the lowballs to go home, while telling those remaining how many bids are in, and offering everyone a chance to "sweeten up" before a final decision is made. I personally would never buy a home through such a process, which tells you that I absolutely would love to sell my home in exactly this fashion should the market be hot whenever that happens. Now that being said, I cannot say for certain whether the frenzy of shouting bids while staring your opponents in the eye will produce more money or the sealed bids will produce more money.
  - michaelt 2y ago
    In theory, a Second-price sealed-bid auction will produce the same price as an Open ascending-bid auction. Every bidder will offer the true value of the item to them, and the item will go to the highest bidder at the second-highest price. But some people might think, due to human nature, that one auction or the other gets higher prices. Maybe an open bid auction gets lower bids, because interested people start lower knowing they can bid again, then back out when they see there's a lot of competition. Maybe sealed-bid auctions work better for large organisations, as getting board approval and CFO sign-off on a multi-million-dollar expenditure takes a few days. Or maybe an open bid auction gets bidders het up and excited because they're in second place and surely no matter what you've bid, you'd always bid 5% more to win - right? None of which is backed by theory, but if it feels true to the judge - who's to say? IMHO the main value of buying infowars, to The Onion, was the publicity and headlines. Those are harvested now. If the auction was repeated I can't imagine The Onion upping their bid.

nativeit 2y ago

Wait, couldn’t this same argument be made in reverse? If the bids were open, the competing parties could simply go $1 above the highest offer, which suggest sealed bids are most appropriate to maximize the value. Auctions can’t be fairly judged in hindsight, generally speaking.

exac 2y ago
They could do an open run-off round of bids until they have two potential buyers, and then switch to secret ballot to get each party's highest bid I suppose?
AnthonyMouse 2y ago
If the bids are secret and the highest bidder pays what they bid then bidders have the incentive to try to bid strategically, i.e. less than what they'd be willing to pay as long as they think that's more than anyone else would be willing to pay. Plus, if there is someone who thinks it's worth way more than anyone else, they could just place a modest bid and then if they lose buy it from the winner for $1 more than what the winner values it at anyway. The way you can avoid this with secret bids is to specify that the highest bidder will pay $1 more than the second highest bidder no matter how high they bid. Then everyone has the incentive to actually specify the maximum they'd be willing to pay, because if the next highest bid is lower than that they still actually do want to buy it, but they lose nothing by bidding higher because they only pay a dollar more than the next highest bidder no matter what, and then you maximize bids. But by that point you don't benefit from keeping the high bid a secret anymore, because of human psychology. Someone bids $100, is the current high bidder and thinks they're getting to buy it, then someone outbids them and loss aversion kicks in so they make a higher bid, even though the first bid was supposed to be their max.
- llimllib 2y ago
  Known as a "second-price" or Vickrey auction for anybody who wants to read some auction game theory: https://en.wikipedia.org/wiki/Vickrey_auction https://en.wikipedia.org/wiki/Vickrey_auction
- freejazz 2y ago
  Yeah but in the bankruptcy setting, this would demonstrate that the trustee didn't get as much as they could.
  - wbl 2y ago
    How would it do that? You need to leave a little on the table for the deal to work.
    - freejazz 2y ago
      Because they'd be paying a dollar more than the second highest bid, not the amount of the highest bid. Frankly, I'm not sure how that could not be more clear.
      - wbl 2y ago
        They wouldn't have made that bid if the rules were different! A vickrey auction has a lot of support as getting revenue.
        freejazz 2y ago
        So?
        AnthonyMouse 2y ago
        So a bid of $200 in a Vickrey auction that results in a $101 sale price doesn't imply that you could have otherwise gotten $200, because in a different type of auction the bidder wouldn't have bid that much.
logifail 2y ago
> If the bids were open, the competing parties could simply go $1 above the highest offer [..] Isn't that what you want to happen? All the auctions I've ever participated have repeated this very process until none of the buyers are prepared to raise their bid, at which point it appears the seller has got the highest price anyone will offer. What am I missing?
- uberman 2y ago
  sealed bidding entices bidders who really want something to overbid to ensure they win. It is a common strategy to maximize offers
- a4isms 2y ago
  In some parts of the world, they auction houses in this exact manner. You show up, post a very large amount of money to prove you're serious, then everyone bids in person like an art auction. Here in Canada, when the market is hot there are lots of auctions withe multiple buyers competing for a house. In my market (Southern Ontario), it is almost always a sealed bid situation, and winning buyers often outbid their rivals by tens of thousands of dollars. The agents around here are fond of a process engineered to maximize the bids: If there are multiple bids that are all reasonable, they will tell the lowballs to go home, while telling those remaining how many bids are in, and offering everyone a chance to "sweeten up" before a final decision is made. I personally would never buy a home through such a process, which tells you that I absolutely would love to sell my home in exactly this fashion should the market be hot whenever that happens. Now that being said, I cannot say for certain whether the frenzy of shouting bids while staring your opponents in the eye will produce more money or the sealed bids will produce more money.
- michaelt 2y ago
  In theory, a Second-price sealed-bid auction will produce the same price as an Open ascending-bid auction. Every bidder will offer the true value of the item to them, and the item will go to the highest bidder at the second-highest price. But some people might think, due to human nature, that one auction or the other gets higher prices. Maybe an open bid auction gets lower bids, because interested people start lower knowing they can bid again, then back out when they see there's a lot of competition. Maybe sealed-bid auctions work better for large organisations, as getting board approval and CFO sign-off on a multi-million-dollar expenditure takes a few days. Or maybe an open bid auction gets bidders het up and excited because they're in second place and surely no matter what you've bid, you'd always bid 5% more to win - right? None of which is backed by theory, but if it feels true to the judge - who's to say? IMHO the main value of buying infowars, to The Onion, was the publicity and headlines. Those are harvested now. If the auction was repeated I can't imagine The Onion upping their bid.