You have read

about the work

and seen an

example of the

work. We will now

walk through an

explanation of how

we will determine

your pay for this

work.

We will use an auction

to choose whom we

employ.

• We will start by hiring

the person with the

lowest bid and keep

hiring until we have

hired as many people

as we need.

• Everyone who is

hired will be paid the

same amount. The

amount will be

determined by the

lowest bid that we DO

NOT accept.

•This means the best

approach is for you to

set a bid equal to your

true value for the

task—the lowest wage

you would be happy to

work for.

• To make sure you

understand how this

works, we would like to

go through a few

examples.

YOU

You are bidding

against 3 other

people.

YOUR VALUE

= $40

Pretend that the

lowest amount you

would be willing to

work for is $40.

Maybe this is

because you can

find other work for

$40, or because

you would rather

relax if the pay is

below $40.

This is your value.

You should think

about how much

you would bid

given this value.

YOUR BID

= $25

Let’s pretend that

you bid $25, since

you really want to

make sure that

you win.

$15 $25 $32 $30$15 $25

Now, to see

whether you get

hired, let’s look at

everyone else’s

bid.

If we wanted to

hire 2 people, and

the 3 other people

bidding against

you bid $15, $32,

and $30, then you

would be hired

along with the

person who bid

$15.

$32 $30$15 $25 $30$30$30

The price you

would receive is

the lowest rejected

bid, which is $30.

• This means that

you will work for a

price of $30, but

your true value—

the lowest amount

you are happy

with—is $40.

BID = 25

HIRED

ACTUAL PAY = 30

— TRUE VALUE (40)

ACTUAL PAY (30)

NET (-10)

LOSS

You won the

auction, but you

are losing out by

$10! You would

have been better

off bidding $40

and not working,

since then you

would have been

even.

YOU

Again, you are

bidding against 3

other people.

YOUR VALUE

= $40

Again, the lowest

amount you would

be willing to work

for is $40,

meaning that is

your value.

YOUR BID

= $60

Now, to be sure

you really get a

price that is good

for you, suppose

you bid $60.

$15 $60 $45 $50$15 $45Now, to see

whether or not you

get hired, let’s look

at everyone else’s

bid.

If we wanted to

hire 2 people, and

the 3 other people

bidding against

you bid $15, $45,

and $50, then we

would hire the

person who bid

$15 and the

person who bid

$45.

$60 $50$15 $45 $50$50$50

The price that they

would receive is

the lowest rejected

bid, which is $50.

BID = 60

TRUE VALUE = 40

ACTUAL PAY = 50

LOSS

You would not be

hired, even though

you would have

been happy to

work for a price of

$50.

Not hired, even though you

are willing to work for the

actual pay, $50.

$40$15 $45 $50$45$45$45

You would have

been better

bidding $40. The

price would then

be $45, since $45

is now the lowest

rejected bid.

YOU

Like before, you

are bidding against

3 other people.

YOUR VALUE

= $40

Your value is $40

again. That

amount is the least

amount for which

you would be

willing to work.

YOUR BID

= $40

But now, let’s

pretend that you

bid $40 since that

is your true value.

$15 $40 $45 $60$15 $40

Now, to see

whether you get

hired, let’s look at

everyone else’s

bid.

If again we wanted

to hire 2 people,

and the 3 other

people bidding

against you bid

$15, $45, and $60,

then you would be

hired along with

the person who bid

$15.

$45 $60$15 $40 $45$45$45

The price that you

would receive is

the lowest rejected

bid: $45.

BID = 40

TRUE VALUE = 40

ACTUAL PAY = 45

— TRUE VALUE (40)

ACTUAL PAY (45)

NET (+5)

WIN

You are happy with

the work at $45,

since you are

getting a benefit of

$5 above your true

value.

CONCLUSION:As the examples have shown, you should

always bid your true value. So, think hard

about what wage would make you happy to do

this work.