Alan Buxton recently posted a novelty bit on his e-Sourcing Place describing how Takashi Hashiyama, president of Maspro Denkoh Corporation, decided how to sell his company’s art collection. In the end he chose the classic children decision-maker paper, rocks and scissors and let the two competing suppliers duke it out playground style.
In the latest issue of Efficient Purchasing, IBX Andreas Bernhard recalled a similar historic moment; Johan Goethe using a second price auction to establish the value of his work:
An auction is basically motivated when you suspect lack of transparency. One of the most famous examples of getting more transparency by using an auction is the German author Goethe, who used a second price auction to establish his market value. In 1797 he wrote to his publisher Vieweg: “I propose to offer Mr. Vieweg an epic poem, Hermann and Dorothea, which will have approximately 2000 hexameters. (…) Concerning the royalty we will proceed as follows: I will hand Mr. Böttiger a sealed note which contains my demand, and wait for what Mr. Vieweg will suggest to offer for my work. If his offer is lower than my demand, then I take my note back, unopened, and the negotiation is broken. If, however, his offer is higher, then I will not ask for more than what is written in the note to be opened by Mr. Böttiger.”
The complete setting of this auction has been analyzed by the game theory experts Benny Moldovanu and Manfred Tietzel in “Goethe’s Second-Price Auction”. Pressure pays off, even in the eighteenth century!
Andreas full article describing different e-auction scenarios can be downloaded from the Efficient Purchasing website.
September 2, 2008 at 5:19 pm
Great one, I have been taught something new on auctioning.
“I Only Know That I Know Nothing”