Depends what you’re comparing Second Price Auction to, though, right?
I agree with the point that there is probably a longterm new equilibrium if you start doing it all the time, but then I thought for 10 minutes about it and I’m not sure what outcome you’d be worried about.
In the case of roommates negotiating the value of each room: this happens all the time for every shared apartment.
If landlords got to see the outcome of those negotiations, it might cause them to raise rents more, but landlords already get a general sense of when they are underselling their property and raise rents when they can.
If roommates continuously rented together and wanted to extract value from each other, without a second price auction, roommates are still often incentivized to exaggerate preferences. The SPA just streamlines the negotiation and helps ensure minimal envy between room allocations. (It might get less “magically good seeming” in equilibrium, but it still seems better than many alternatives)
Depends what you’re comparing Second Price Auction to, though, right?
I agree with the point that there is probably a longterm new equilibrium if you start doing it all the time, but then I thought for 10 minutes about it and I’m not sure what outcome you’d be worried about.
In the case of roommates negotiating the value of each room: this happens all the time for every shared apartment.
If landlords got to see the outcome of those negotiations, it might cause them to raise rents more, but landlords already get a general sense of when they are underselling their property and raise rents when they can.
If roommates continuously rented together and wanted to extract value from each other, without a second price auction, roommates are still often incentivized to exaggerate preferences. The SPA just streamlines the negotiation and helps ensure minimal envy between room allocations. (It might get less “magically good seeming” in equilibrium, but it still seems better than many alternatives)