Auction Math: First-Price, Second-Price, Reserve Prices & the Winner's Curse

What you'll build

What you will be able to do

Each lab ends with a concrete result that you build yourself and the checker confirms, cell by cell.

• Read Gavelry's bid table and work out the winner and the price under a first-price sealed auction, a Vickrey auction and an English clock auction.
• Calculate the expected highest and second-highest value for 2 to 7 bidders and see how competition raises Gavelry's expected revenue.
• Calculate the equilibrium bid for six lots and confirm on a bid grid that (n − 1) ÷ n × value really maximises the expected profit.
• Calculate Gavelry's expected revenue under three very different rule books for 2 to 7 bidders and check that they all come out the same.
• Calculate Gavelry's expected revenue and payoff for nine reserve prices, find the best one and chart the curve.
• Measure how much the winners of eight pallet auctions overpaid, compare it with the theoretical overestimate and chart the result.
• Work out what each ad position would cost Gavelry per click and per day, and find the position that earns the most, which is not the top one.
• Estimate Gavelry Freight's chance of winning a lane tender from past rival bids and choose the bid with the highest expected profit per load.