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With the deepening of information asymmetry and game theory, economists have found that in many cases, people will instinctively take lies, hide or strategically behave, and do things that go against their nature. As the auction progresses, more and more economists realize that more important than the auction strategy is the mechanism of the auction.

Before starting our story, if you are interested, you can do an experiment: select a few people and ask them to guess a number, which must be an integer between 1 and 100. In the end, whoever is closest to the average of all the numbers guessed by the experimenters will get 100 yuan.

At this time, everyone thinks: if everyone else chooses the number randomly at the beginning, 50 will be everyone's guess. At this time, guess 1/3 of 50, which is about 17, is likely to win. However, when everyone will guess the number 17, everyone will guess 1/3 of 17, which is about 6. And so on, everyone in this game ends up guessing the only smallest number, which is 1.

The game is a visual reflection of the "traveler's game" in the following story.

Two travelers, A and B, each bought a porcelain vase when they came from a famous tourist destination known for producing porcelain. When I was collecting my luggage, I found that the vase had been broken. They claim compensation from the airline. The airline estimates the price of the vase at around 80-90 yuan, and does not know the exact price of the two passengers. The airline asks two passengers to write down the vase price themselves within a minute. If the two write the same, it means that they have told the truth, and they will be compensated according to the amount they wrote. If the two people write differently, then it is determined that the guest who writes low is telling the truth, and will be compensated at this low price, but the passenger who tells the truth will be rewarded with 2 yuan, and the passenger who tells the lie will be fined 2 yuan. If both of them write $100, they both get $100. Given that B writes $100 and A writes $99, A will get $101. B thinks that if A writes $99, it is better for him to write $98 than $100 because he gets $100; And write 100 yuan, if A writes 99 yuan, he only gets 97 yuan. And given that B writes 98 yuan, A will write 97 yuan...... In this way, in the end, two people only wrote 1 yuan.

However, the stories told above are just an ideal situation of the game, and in reality it is impossible to fully achieve this due to their limited rationality. But in life, more and more things require us to understand the internal mechanism of the game.

In October 2008, Christie's in France set off a big wave because of the "beast head auction". They announced that they would auction the bronze statues of rat and rabbit heads in the Old Summer Palace. After the news came out, it sparked heated discussions among the Chinese people, and nearly 100 people formed a lawyer group to pursue the claim. On February 24, 2009, the French court approved the auction. On February 26 of the same year, Cai Mingchao won the bronze statue, but said that he would not pay.

We don't want to make any moral judgments about this behavior here, we focus on auctions that are often used around us.

With the deepening of information asymmetry and game theory, economists have found that in many cases, people will instinctively take lies, hide or strategically act and do things that go against their nature. As the auction progresses, more and more economists realize that more important than the auction strategy is the mechanism of the auction. What kind of mechanisms enable people to speak the truth? What kind of auction should we construct so that the outcome of this game is the goal of the people? In recent years, economists have made great breakthroughs in this area, which is of far-reaching significance to mechanism design.

To date, there are four main auction mechanisms: British-style auctions, Dutch auctions, first-price auctions, and second-price auctions.

A British-style auction, also known as an increase auction, is the most common auction method, which refers to an auction in which the bidding of the auction object increases from low to high until the highest price (reaching or exceeding the reserve price) is struck at the hammer. To put it simply, whoever bids higher wins. Before the auction, the seller can set a reserve price, and when the highest bid price is lower than the reserve price, the seller has the right not to sell the auction name. Of course, the seller can also set an unreserved price, in which case the highest bidder becomes the buyer when the auction deadline is reached.

The above-mentioned English auctions are different from traditional English auctions. For each lot, the traditional auction does not need to determine the auction time in advance, and the auction can generally end in a few minutes; In the case of online auctions, it is necessary to determine the start and end times of the auction in advance, which is usually a few days or weeks. For example, on the eBay auction site, the duration of the auction is generally 1 week. Due to the long duration of online auctions, this has led many online bidders to "snipe" situations, i.e. not start bidding until the last few minutes before the auction ends, trying to submit a bid that will beat all other bidders and leaving other bidders without time to snipe. One way to address bidding at the last minute of an auction is to add an extension period for a fixed period. For example, the extension period is set to five minutes, which means that if there are bids in the last five minutes, the auction will automatically close for five minutes. This process continued until there were no bids within five minutes, and the auction was terminated. This method effectively solves the phenomenon of "sniping".

English auctions have their own drawbacks. Since the winning bidder's bid only needs to be slightly higher than the previous high, each bidder is reluctant to immediately bid according to their estimate. In addition, the bidder takes a certain risk, and he may be attracted by the exciting bidding process, and bid more than the estimated price, a psychological phenomenon known as the "winner's curse".

Dutch auctions, also known as reduced auctions, refer to the bidding of the auction object from high to low until the first bidder bids (reaching or exceeding the reserve price) and the quasi-daring bidder wins. Compared with the British auction, the Dutch auction has its outstanding features and advantages. In most cases, Dutch auctions have a distinctly hybrid nature, i.e. alternating between bid-up and mark-down auctions. When there are more than two bidders in a Dutch auction, it immediately switches to an increase auction, and thereafter the process of bidding for an increase continues until no one raises the bid, and the last bidder to increase the price is successful. Dutch auctions are also often very fast, and the first person may have bought everything. Although it is a "silent auction", there is still fierce competition among bidders. If you don't bid in time, someone else may buy everything or the best part.

Dutch auctions originated in the Netherlands and are said to have been originally associated with the buying and selling of tulips. At the time of picking, the farmer often sets an opening price according to the market, for example, if there is a buyer who asks for $1 for a flower, it will be auctioned, if no one asks, the farmer will drop 2 cents, and the buyer should be the earliest 98 cents to bid, and so on, until it is sold. This auction method is generally applied to the auction of fresh commodities and agricultural products, aiming to promote the circulation of products.

The first price auction, i.e. the sealed auction. Each bidder writes the price in a closed envelope or in a cantonment bid, where the highest bidder receives the item and pays the price in the bid.

The second price auction is also called the Vickery auction. The highest bidder gets the lot, but the second highest bid is paid. This allows bidders to bid according to their valuation, and if other bidders' valuations are lower than the highest bid, the buyer receives a certain amount of profit.

eBay Auction was born in the 90s of the 20th century during the e-commerce boom. Its emergence is arguably one of the most successful and innovative undertakings of the period. If you find an item you like on eBay Auction and you are willing to pay 25 yuan, but the current bid is 2.25 yuan, then you need to sit in front of the computer and wait patiently for the bids again and again until you reach 25 yuan. Luckily, there is no hassle in participating in eBay auctions, and there is an easy way to do this: you can enter your highest bid in the auction window, and eBay Auction will privately bid for you according to the highest price you are willing to pay, so you don't have to keep an eye on the auction. If another bidder bids higher than the maximum price you are willing to pay, you will not be able to get the item. And if the highest bid of the other bidders is lower than the maximum price you are willing to pay, the item is yours. The price you end up paying is the next highest bid that is a little lower than your bid. Therefore, this type of auction on eBay is a typical second-price auction.

William Vickery, the proposer of the "Vickery Auction", was a great economist. In recognition of his contributions to the study of the information economy, the 1996 Nobel Prize in Economics was shared by Professor Emeritus William Vickery and Professor Morris of Columbia University.

Although Vickery has passed away, the study of auctions did not end with the advent of the auction market. Collusion and fraud are always lingering, and many economists have conducted a lot of research in order to improve the auction market, and have achieved certain results.

In 2007, the Royal Swedish Academy of Sciences announced that the Nobel Prize in Economics would be awarded to three American economists, Leonid Hevic of the University of Minnesota, Eric Maskin of the Center for Advanced Study at Princeton University, and Roger Myerson of the University of Chicago, in recognition of their contributions to the creation and development of "mechanism design theory". In 1981, Myerson proposed the theory of "optimal auction design", which solves the problem from information economics, and the purpose of mechanism design is to alleviate the principal-agent problem caused by information asymmetry. Hervic is the originator of this theory, while Maskin and Myerson represent the mainstream of current research. The three of them jointly won the Nobel Prize in Economics, which is also regarded as a common expectation in the academic community.

The problems in the auction game are formed by various auction strategies, and in order to maintain a fair and balanced state in the auction mechanism, we need to establish a sound mechanism.