In a previous post I wrote on my experience as a consultant to participants in auctions. I was interested to hear the other side of the coin: how do the ones who set the rule of the auction perceive the competitive situation they are in charge of. To answer this question I met Dorit Levy Tyller, a well known Israeli advocate who has decades of auctions in her professional past.
According to Ms. Levy Tyller, the issue that bothers her most is coordination among the bidders. In a small country like Israel, in which everybody knows everybody else and have friends who know the rest, participants do their best to talk, exchange information, and dissuade others from increasing their bid. When the bidders are all present at the same hall, the auction turns into an oriental bazaar with a lot of psychological pressure on participants.
To overcome this difficulty, Ms. Levy Tyller assigns each participant to a different room and asks the participants to arrive to their designated rooms at different times. During the auction she moves with her team from one room to the next, informing each participant of the current highest bid and asking them whether they increase their bid. This is a slow process that requires the participants’ trust in the auctioneer, a trust that she gained with the dozens of auctions she had already organized.
What are the issues that affect the participants’ behavior? According to Ms. Levy Tyller, the expectation to win the auction and the tension that builds along the process causes the bidders to increase their bids. Pressure from other participants, on the other hand, hinders price increase.
Most winners are the calculated and level-headed participants. Anxious bidders who make plenty of noise usually quit before the end. Moreover, those who come prepared and know well the status of the auctioned item, tend to win more often.
At the end of our conversation Ms. Levy Tyller admitted that I was the first game theory consultant she ever met. I take it as a good sign: the utility function of game theorists puts higher weight to research and teaching than to consulting jobs. I am glad to be part of this group.