Friday 30 August 2013

Reserve prices, marginal utility, and management degrees

Sellers on trade-me set a reserve price: the minimum price at which they're willing to sell whatever they're auctioning off. In the absence of strategic play, a seller should set the reserve price at the lowest amount at which they're willing to sell the product: they should be trivially better off for having sold it than for not having sold it at that price. While they gain income that brings utility when they sell it, they forgo the flow of utility provided by continued ownership of the good.

Some things you might value at zero dollars, or negatively. That clunky thing that's taking up needed space: set a reserve price of $0 and hope somebody takes it away for free.

Let's then parse this TradeMe listing:
Replete with intermediate level Economics knowledge, this degree will help you realise that the reserve price and the marginal utility gained by the seller are worth exactly the same!
The seller is auctioning off his Bachelor of Commerce in Management, earned at the University of Canterbury.

I hope the seller means that he or she values the degree certificate at the $1 reserve price: owning the degree certificate provides its current owner with utility worth $1, and losing the certificate would make its owner $1 worse off. And so the reserve price is equal to the utility the degree certificate provides.

If the seller meant instead that he or she would gain marginal utility worth $1 by achieving the reserve bid, that can only be true if the value of owning the certificate were $0. That's plausible from the rest of the text, but hardly clear.

I've copied the whole ad below. I'm considering bidding. Then at Faculty meetings, we can truly state that at least one member of the Economics department owns a Management degree. If it ever comes up.

Original unused Bachelor of Commerce - $1 reserve! Brand new item

Major: Broken Dreams

  • Current bid: $37.50
  • Reserve met Reserve met 
  • Closes: Thu 5 Sep, 8:59 pm
  • Listing #: 632646059
Auto-bid site help.
Limited edition print, this 2007 Bachelor of Commerce is barely used and in "like new" condition! Originally priced at nearly $30,000, this is now available at a fraction of the price, with only $1 dollar reserve!

Avoid the gruelling 3+ year sacrifice necessary to pull good grades and skip the rampant physical and mental diseases by buying your degree direct from Trademe. Replete with intermediate level Economics knowledge, this degree will help you realise that the reserve price and the marginal utility gained by the seller are worth exactly the same!

Revel in the accolades of your family as you become the first among them to attain advanced education, only to later avoid their sincere enquiries as to your job opportunities and general wellbeing. Marvel as employers overlook you time and time again, and let your youthful eagerness get beaten out of you with a sack of potatoes (the only food you could afford this week).

Eke out a living in the illustrious field of data entry or pick up a day job putting PostIts one-by-one on a wall - all without the guilt and shame that would exist if you actually made the mistake of getting the degree yourself. Finally, watch your fragile sense of self-worth crash like the Hindenburg; casting hopes and ambitions to the breeze, leaving you twisted, hollow and bitter.

The winning bid will receive ALL THIS and more in the original issued degree pictured above, with the one lucky individual having their name lovingly embossed in crayon over the previous owners. Don't delay, get your degree today!
Please read the questions and answers for this auction.

Shipping details

  • Free shipping within New Zealand
  • Seller allows pick-ups
  • Seller is located in Christchurch City, Canterbury

Payment details

  • NZ bank deposit

About the seller

gabocha (46 
  • 100% positive feedback
  • Member since May 2003

1 comment:

  1. Both a sad and a funny essay, I thought. I have an uncle who was a 'top seller' (what ever that means) on Trademe for a while. He sold a lot of stuff. His advice was always set a very low reserve - that way you attract lots of initial interest and, thereby, often get a little irrational exuberance from bidders that enables a decent price. His advice based purely on having enough items to sell that he had tried both low reserves and reserves near to the expected price.