Auction instructions
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Transcript of Auction instructions
You have read
about the work
and seen an
example of the
work. We will now
walk through an
explanation of how
we will determine
your pay for this
work.
We will use an auction
to choose whom we
employ.
• We will start by hiring
the person with the
lowest bid and keep
hiring until we have
hired as many people
as we need.
• Everyone who is
hired will be paid the
same amount. The
amount will be
determined by the
lowest bid that we DO
NOT accept.
•This means the best
approach is for you to
set a bid equal to your
true value for the
task—the lowest wage
you would be happy to
work for.
• To make sure you
understand how this
works, we would like to
go through a few
examples.
YOU
You are bidding
against 3 other
people.
YOUR VALUE
= $40
Pretend that the
lowest amount you
would be willing to
work for is $40.
Maybe this is
because you can
find other work for
$40, or because
you would rather
relax if the pay is
below $40.
This is your value.
You should think
about how much
you would bid
given this value.
YOUR BID
= $25
Let’s pretend that
you bid $25, since
you really want to
make sure that
you win.
$15 $25 $32 $30$15 $25
Now, to see
whether you get
hired, let’s look at
everyone else’s
bid.
If we wanted to
hire 2 people, and
the 3 other people
bidding against
you bid $15, $32,
and $30, then you
would be hired
along with the
person who bid
$15.
$32 $30$15 $25 $30$30$30
The price you
would receive is
the lowest rejected
bid, which is $30.
• This means that
you will work for a
price of $30, but
your true value—
the lowest amount
you are happy
with—is $40.
BID = 25
HIRED
ACTUAL PAY = 30
— TRUE VALUE (40)
ACTUAL PAY (30)
NET (-10)
LOSS
You won the
auction, but you
are losing out by
$10! You would
have been better
off bidding $40
and not working,
since then you
would have been
even.
YOU
Again, you are
bidding against 3
other people.
YOUR VALUE
= $40
Again, the lowest
amount you would
be willing to work
for is $40,
meaning that is
your value.
YOUR BID
= $60
Now, to be sure
you really get a
price that is good
for you, suppose
you bid $60.
$15 $60 $45 $50$15 $45Now, to see
whether or not you
get hired, let’s look
at everyone else’s
bid.
If we wanted to
hire 2 people, and
the 3 other people
bidding against
you bid $15, $45,
and $50, then we
would hire the
person who bid
$15 and the
person who bid
$45.
$60 $50$15 $45 $50$50$50
The price that they
would receive is
the lowest rejected
bid, which is $50.
BID = 60
TRUE VALUE = 40
ACTUAL PAY = 50
LOSS
You would not be
hired, even though
you would have
been happy to
work for a price of
$50.
Not hired, even though you
are willing to work for the
actual pay, $50.
$40$15 $45 $50$45$45$45
You would have
been better
bidding $40. The
price would then
be $45, since $45
is now the lowest
rejected bid.
YOU
Like before, you
are bidding against
3 other people.
YOUR VALUE
= $40
Your value is $40
again. That
amount is the least
amount for which
you would be
willing to work.
YOUR BID
= $40
But now, let’s
pretend that you
bid $40 since that
is your true value.
$15 $40 $45 $60$15 $40
Now, to see
whether you get
hired, let’s look at
everyone else’s
bid.
If again we wanted
to hire 2 people,
and the 3 other
people bidding
against you bid
$15, $45, and $60,
then you would be
hired along with
the person who bid
$15.
$45 $60$15 $40 $45$45$45
The price that you
would receive is
the lowest rejected
bid: $45.
BID = 40
TRUE VALUE = 40
ACTUAL PAY = 45
— TRUE VALUE (40)
ACTUAL PAY (45)
NET (+5)
WIN
You are happy with
the work at $45,
since you are
getting a benefit of
$5 above your true
value.
CONCLUSION:As the examples have shown, you should
always bid your true value. So, think hard
about what wage would make you happy to do
this work.