Grib Diamonds’ auction system
At Grib Diamonds, we use a multi-round ascending clock auction. The clearing (winning) price is set by the highest losing bid. This means that the winners do not pay the price they have bid, but the price of the customer who narrowly missed.
Our auction system was designed according to the latest auction and game theory. The methodology is based on the Nobel winning economist William Vickery’s auction theory on second price auctions. This gives the bidder the incentive to bid their true value on the goods – and not worry about the ‘winner’s curse’. ‘The winner’s curse is when the winner, in a tender, tries not to pay too far over other bidders due to incomplete information. As a result of this, bidders “shade” their bids for fear of overpaying, thus not giving a true reflection of the market value.
As transparency and consistency are key drivers for Grib Diamonds, we spend a lot of time and effort on our quality control to ensure our descriptions, quality adjustments and sales parcels are reliable. Our customers have access to all of the sorting results that make up the multiple-splits that are on offer. We also indicate any quality differences between the splits from the same deal. This is to help remove the uncertainty for our customers so together with a physical inspection they know exactly what they are bidding on.
So, throughout the auction participants bid for the theoretical average split. If they win, the system automatically randomly allocates to them one or several actual splits from the deal. The actual price the winners pay for the split(s) is adjusted for the quality difference from the theoretical average split. During the auction itself participants can see the evolving demand for the different deals being offered. With the conclusion of the auction all bidders can see the clearing prices for the deals that were sold.