Price of anarchy in auctions
Okay kiddo, let me explain to you what the "price of anarchy" is when we talk about auctions.
Imagine you and your friends want to sell some toys. You decide to hold an auction and the winner gets to buy the toy. But, there is a catch - everyone can only bid once and they can't see what other people are offering.
Now, let's say your toy is worth $10. You hope that someone will bid at least $10 for it, so you and your friends can get the most money.
But, what if one of your friends decides to be sneaky and only offer $5? Now, the toy might only sell for $5, even though it is worth $10.
This is where the "price of anarchy" comes in. It is the difference between the amount of money you would have made if everyone bid honestly and the amount of money you actually made when someone acted selfishly.
So, in this example, the price of anarchy would be $5 because you lost out on the extra $5 you could have made if everyone had bid honestly.
Basically, the price of anarchy is how much you lose out on when people don't play fairly in an auction. It helps us understand how much money we might be losing out on in real-world auctions.
Imagine you and your friends want to sell some toys. You decide to hold an auction and the winner gets to buy the toy. But, there is a catch - everyone can only bid once and they can't see what other people are offering.
Now, let's say your toy is worth $10. You hope that someone will bid at least $10 for it, so you and your friends can get the most money.
But, what if one of your friends decides to be sneaky and only offer $5? Now, the toy might only sell for $5, even though it is worth $10.
This is where the "price of anarchy" comes in. It is the difference between the amount of money you would have made if everyone bid honestly and the amount of money you actually made when someone acted selfishly.
So, in this example, the price of anarchy would be $5 because you lost out on the extra $5 you could have made if everyone had bid honestly.
Basically, the price of anarchy is how much you lose out on when people don't play fairly in an auction. It helps us understand how much money we might be losing out on in real-world auctions.