[whymauri]

The highest bidder pays the second highest bid. Generalized, the k-th highest bidder pays the (k-1)-th bid for some k-th item.

It enforces truthful bidding and is revenue optimal. How is it needlessly complex?

[orijing]

You're describing the generalized second price auction (GSP) which is NOT incentive compatible, which means the optimal strategy isn't to bid truthfully. VCG is.

[whymauri]

You are correct. I wasn't very clear/am very tired.

That being said... GSP on one item is VCG, no?

[marcinzm]

As I understand it, GSP on a single item is just a standard second price auction which is truthful.

[hdkrgr]

That's correct.

[doctorpangloss]

While revenue optimal, growth in retail is eventually driven by psychology, not pricing, since if there’s anything our real economy is good at producing, it’s morons.

[whymauri]

That's the Bulow-Klemperer theorem. You would rather have more growth (bidders) at the expense of an optimal bidding mechanism.

[antpls]

If actors are humans, then sure. But if actors are rational computers, and it's used billions time a day, you might prefer optimality.

Not saying this would be useful for communication between computers, but coming from CS degree, I have the intuition it could have some use cases.

[denormalfloat]

It's needlessly complex because it doesn't solve any problems I have or any I have heard of. A simpler auction would still work pretty well, and be more easily understood by participants.

I ask because the only case I can think of this providing any value, it would be too complex. The example would be splitting up the assets after a divorce, where each spouse bids on the parts of the estate. A VCG auction may be more accurate, but what couple or lawyer would agree to use this system? It's too complex.

[zodiac]

What "simpler auction system" would you propose?