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STL comments on Bargaining and Auctions - Less Wrong
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Comments (70)
If the dealer doesn't inherently value the table (for more than firewood, etc.) and nobody else in the world values (or ever will value) the table for more than $40, then the dealer should sell for less than $50.
Sunk costs.
Agreed - a better hypothetical might be "Suppose an antique dealer has a table which he knows he can sell for $50 to another buyer [...] The dealer should never sell for less than $50."
... and we get the situation of BATNA introduced later ;).
If the antique dealer is not stupid, he should assume that he can sell the table for at least 50€, otherwise he would not buy it. This assumption might be wrong, but that would be another issue.
I do agree that this introduces the BATNA situation later - but that's so general that I actually can't think of any reason that isn't considered "BATNA" for why the dealer should never accept less than $50. Maybe I just need to open up to more creative situations: the Mafia mob wants to keep table prices up and so threaten to shoot him if he sells it for less than $50; or the government decides that a fixed Table Tax was necessary so that each table was taxed $50 regardless of the price it was sold at; or he wants to signal that his goods are of high quality and so considers any price less than $50 to be too low for his store. Okay, on second thought this has turned into a pretty good example of why I should never say "I can't think of any examples" without at least first trying to think up some examples.
Upvoted for this.
This often happens to me:
"Hmm..."
Thinks.
"I can't think of anything."
Tons of ideas spring to mind.
Sounds like my thing where I can only locate objects after the ritual of saying "hey where is the".
When I started my current job, I developed the ritual of writing email to the developer whenever I had a question about how code worked. Often, the developer no longer worked for the company, which didn't matter, since I never sent the email anyway.
What I found was that I would write emails like "So.. I notice X, and Y, and Z. Which seems like they contradict each other. Of course, it's possible that A is also true, which would explain it, but if A were true I'd expect to see B. Which..." (research) "I do indeed see. So, um, never mind." and delete the email.
Eventually I figured out how to have that conversation entirely inside my head, but it took quite a while.
Eric S. Raymond and Rick Moen make a very similar point in How to Ask Questions the Smart Way.
That's a lovely essay; thanks for the pointer.
I am particularly fond of the framing that among "hackers" the value of a question is presumed to be in what it teaches. The authors don't say this explicitly, but this contrasts sharply with the wider culture in which the value of a question is presumed to be in that it increases the status of the person being asked (whether they can answer it or not). Much of the intercultural communication failure around asking and answering questions can be traced back to that.
This is called rubber ducking.
I'd never heard that expression, though I was familiar with the technique (with a teddy bear, though, not a duck). That said, I wasn't actually programming at the time, just trying to understand what the code did.
I think I've seen it explained with a rubber duck more often, but I learned it first with a teddy bear too, probably on page 123 of Kernighan & Pike's "wiener dog book":
With regards to the Table Tax, what if there are storage costs to the table, so its value unsold is negative?
| The dealer should never sell for less than $50, and I should never buy for more than $400, but any value in between would benefit both of us. |
The range is not wrong from just the dealer's perspective. If the exact same table is on sale at the store next door for $10, then the buyer is still making a poor decision buying it for $50 with the first dealer. Of course, if we are talking that in this bargaining game, there is only one seller of tables in the world, and only one buyers, I guess this does not apply.
Of course, maybe the buyer would be better off rethinking how much he values the classiness a new table would bring to his dining room.
I immediately had the same thought, but on second thoughts, I don't think it's quite as simple as that - remember this isn't the only table the dealer will ever buy, and I'm not the only person he will ever sell a table to. The dealer needs to make a profit in general, and while it might make sense to make a loss on this particular table, it probably doesn't make sense to have the attitude "it's ok if I make a loss on tables that I sell". On the other hand, it's quite possible that the dealer would be better off if he had that attitude, as then he'd buy and sell more tables, and each table might still have a positive expected value. Either way, I think there is something to the idea that the dealer might want to remember what he paid for a table when deciding how much to sell it for.
Indeed, the concept of sunk costs sounds like a specifically CDT one to me, so I wouldn't be surprised if there were scenarios whereas TDT considerations mean that the fact that you know you yourself decided to pay $50 for a table, using the same decision theory as you're using now, is relevant.
Perhaps, but I doubt it. It becomes more important later--when it's time to re-stock. That's whent the dealer should think, "Let's see, I bought the last table for $50 and sold it for $40. This time I won't buy for more than $50."
In other words, it should affect the dealer's bargaining with her own dealer, not with the buyer.
Edit: I changed the last word in the previous sentence from "seller" to "buyer."
On the one hand, good point. On the other, it does seem like the $50 number plays an important role in negotiations, maybe because of the generalization to a marketplace, where dealers who sell for above $50 continue to be furniture dealers and are generally satisfied with the deal, but dealers who sell for under $50 go out of business. At the very least $50 makes a powerful Schelling point.
Negotiation is impossible in the underwater scenario.
(Edited to add: It is impossible for negotiation to result in profit for the dealer. The dealer can negotiate to minimize his loss, possibly by complaining about how much he originally paid for the table. In no event can he convince a buyer to pay $50 or more for a table that they value at $40 or less, assuming a completely idealized scenario.)