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4 comments:
I got asked that "how much would you pay to play this game" by MS in a MBA interview. Love the DE Shaw link
Heh, heh, maybe we can all work at DE Shaw!
""Ten people are bidding on a stock at 90, while 100 people are offering to sell it at 91. What price is the next trade?
Interviewees often say that since there are more sellers than buyers, the sellers get to determine the price. That logic usually yields an answer between 90 and 91. That's exactly wrong. "They're not thinking about what's going on in the real world," says Rubczyk. In reality, when there are more sellers than buyers, the price falls. So the next sale would probably be in the mid- to low 80s.
"Some candidates would say you can't answer that question, because there's no formula," says Rusczyk. "If that makes their heads explode, that's a problem.""
Comment: Uh, what about maybe trading at 90 when a seller, any seller, first decides to hit a bid? Given DE Shaw's track record, probably either the Slate author or Mr. Rubczyk were very sloppy in the way the question was framed.
Wherever the error in transmission, this little anecdote reveals cloudy thinking, and it may be karma that such attaches itself to Mr. Summers, last active member of the 'Committee to Save the World' from 1999.
Agree with Gentlemutt. The equilibrium price is likely in the 80s, but I'm sure some seller will realize this and hit the bid just to be closed out. A better question is what will the average sale price for the next 100 shares be, below 90, 90, 91, or above 91.
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