“we can write down models of auctions and we can develop some really profound results saying that it doesn’t matter how you auction things off provided some conditions are met. So that’s really nice. It sort of frees us up to think about other things. And it frees us up to think about how are people are actually going to behave. How much information do they have? How sophisticated are they? How many of them are there? And that can then, then we can use those criteria to decide which auctions we’re going to use. As opposed to spending our time thinking about, well this auction is better than this auction on purely rational grounds. So we talked about what, why do we model. But why do we assume even rational actors? Remember, I said, benchmarks are good things. Remember I said Roger Myerson says, the one who’s got the revenue equivalent theorum, that, assuming rational behavior’s often a very good benchmark. Well, we saw that was the case here in options, because we see. If people are rational, doesn’t matter what mechanism you use. Once we relax that assumption, then the mechanism may matter. But, now we know what criteria to use to think about choosing among auction mechanisms. “- Transcript from Scott Page Coursera
Source:
Scott Page Model Thinking MOOC Course
