Fixed Prices [Re: Shoppers in your Palm and Rainy Day Checks]

Dave Long (dl@silcom.com)
Sun, 20 Jun 1999 22:16:16 -0700


> Also, on the check-sum, hunting-for bargains front: Most people just don't
> want to live in this Gilderesque world where nothing is certain. They want to
> know the price. They don't want it always to be subject to negotiation.

The Vickrey Auction is held to be superior to the normal "high bid gets it"
auction. The difference in mechanism is that in a Vickrey Auction, the high
bidder wins, but only pays the amount of the highest unsuccessful bid (think
of it as winning with <losing bid+epsilon>).

If one has multiple units to auction off, the auction generalizes: the N
highest bids each get a unit, and pay the price of the (N+1)th highest bid.
Now, is there any difference (when N clears the market) between this price and
the classical supply-demand price?

These models imply that there are theoretical, as well as practical, reasons
for fixed-price transactions to be common.

-Dave