Some auction dichotomies
Distinctions between types of auctions/competitions.
Whether auction has reserve price (reservePrice=true/false)
- special case of this is when it is impossible to attain reward, resulting in an implicit infinite reserve price
- when auction has no reserve price, reward is guaranteed to be earned
- however there can be no guarantee that costs expended by bidders = reward
- rather, the difference between total costs expended by bidders and total reward is a function of the heterogeneity of the bidders’ costs
- i.e when all bidders have almost the same costs, they make ~0 profit and total bidder cost = total reward.
- rather, the difference between total costs expended by bidders and total reward is a function of the heterogeneity of the bidders’ costs
- however there can be no guarantee that costs expended by bidders = reward
Whether bidder with lowest average cost for entire task is subject to competition from bidders with lower marginal costs for fractions of the task (workDivisible=true/false)
- equivalent to: whether it is possible the marginal costs of the contributor to be higher than the marginal cost of any non-contributors
- this significantly reduces the competition for the auction
- as the pool of competitors is reduced from those with marginal cost for a fraction of the task that is lower than the clearing price
- to only those who’s marginal cost for the entire task is lower than the clearing price
- i.e. this is the case where in order to participate:
- rather than simply needing a lower marginal cost for a subset of the task, than any of the current participant(s),
- you actually need a lower marginal cost for the entire task than any of the current participant(s)
- or in other words, a greater output for the same reward, given that the entire reward is allocated to the winning bidder
- you actually need a lower marginal cost for the entire task than any of the current participant(s)
- rather than simply needing a lower marginal cost for a subset of the task, than any of the current participant(s),
- as the pool of competitors is reduced from those with marginal cost for a fraction of the task that is lower than the clearing price
Analysis of various instances
- reservePrice = true, workDivisible = true
- not guaranteed to receive bids, work efficiently allocated amongst bidders
- examples:
- extraction of gold in ocean
- euler liquidations
- reservePrice = true, workDivisible = false
- not guaranteed to receive bids, work inefficiently allocated to single bidder
- examples:
- fixed-discount full liquidation auctions
- reservePrice = false, workDivisible = true
- guaranteed to receive bids, work efficiently allocated amongst bidders
- examples:
- PoW
- PoS
- treausury auctions
- Dai CDP liquidation auctions
- reservePrice = false, workDivisible = false
- guaranteed to receive bids, work inefficiently allocated to single bidder
- examples:
- Proof of VDF
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Distbit
Interested in econ, cryptoecon, agents, finance, epistemology, liberty.