Truly Well Designed?

In my research into this week’s topic of auctions, I came across this site http://99designs.com/ a place where graphic designers compete over a guaranteed prize put forth by the company commissioning the design. I was intrigued if auction theory could be applied to a market in which the prize was money and the bids were goods. The mechanics of the auction seem to be open, in that contestant’s entries are visible to one another during the various rounds. There are at least two rounds, a preliminary one where rough drafts are selected and a final round in which designs are re-tooled and a winner is chosen. It seems this would be most comparable to an English auction and that the equilibrium is bidding your maximum value of the money (in this case the hours and effort you put towards the design)

However, past this the comparison may seem to break down. For one, a losing bid in an English auction essentially loses nothing, the money is still his. However in this market, the “buyers” (the individuals trying to sell a design) have already done the work and after the first round all they may win is the chance to do more work. This is somewhat offset by ideas of portfolio building, practice and hobbyists, but I don’t think it is wholly offset.

Secondly, and the factor I think most complicates applying auction theory here, is that the contestants are given feedback by the client which is visible to all other “buyers”, and they are able to revise accordingly. This means that valuation of effort may shift if you are perceived as being closer to winning, but also that contestants who may have “bid” less now are presented with easy tips to draw from and incorporate into their own design with presumably less work (valuation), than the original designers. This creates the interesting idea in my mind that an equilibrium play is not only playing your maximum value, but waiting towards the end so that you may more easily supplement this value by drawing from the value of previous entries and feedback.

At this point I wonder if we can even discuss this as under the realm of auction theory, I think we can. What other modifications to the ideas do you think will need to be made in this specific instance or do you think this should not even be discussed using auction theory? Any other thoughts about how this “revers auction” model may be utilized in different ways?

-Andrew

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One thought on “Truly Well Designed?”

  1. This is such an interesting point you are making with this website and the reversed auction. I think that designers would be better off by using the Dutch Auction and overpricing the “goods” rather than using the English style since people might not increase the price enough to reach the price that the “seller” wants for the item. I think that Dutch Auctions play a mental trick on people’s mind making them think they are getting a deal as the price goes down. Plus the competition factor of the auction would allow for people to buy the item for more than its reserved price fearing that some other bidder can win the bid.

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