Unique bid auction
From Wikipedia, the free encyclopedia
Unique bid auctions are a type of lottery in which the participants bid for a particular item by submitting blind or sealed (ie secret) bids: the winner is the bidder who places the highest (or, in some variants, the lowest) unique bid. A "unique" bid, in this context, means one in which the amount offered is different from that offered by any other participant.
In unique bid auctions, it is normal for bidders to be charged for placing their bid. The seller's payment includes the total of these charges, as well as the actual amount bid by the winning participant. For the buyer, the attraction is that they may acquire an item at well below its true value. This type of auction may be regarded as having some of the elements of a normal auction (placing bids) and of a lottery (paying an entry fee and guessing the bids which may be made by other participants) but they are currently legally classified as skill-based prize competitions. However, like a lottery, no skill or use of strategy increases a bidder's chances of winning.
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[edit] Variants
The two most common types are maximum and minimum bid auctions. In a Maximum bid auction, a limit is set for the maximum amount that can be bid. The highest unique bid when the auction is closed wins the auction.
In a minimum bid auction the procedure is the same but the lowest unique bid wins.
[edit] Examples of a maximum bid auction
For example, a maximum bid auction sets a limit of £10 and the highest ten bids on the auction are:
£10.00 £10.00 £9.99 £9.99 £9.99 £9.98 £9.97 £9.96 £9.96 £9.96
The bidder who placed a bid of £9.98 would be the highest "unique" bid and therefore the winner.
In a typical real example, a car worth £20000 might be offered to bidders at a maximum bid of £100. The winning bidder would get the car at a price well below its retail value. If the auctioneer charges £10 a bid then they would need to get 2000 bids to cover the cost of the car. Once the auctioneer has received 2000 bids, any more bids would result in the auctioneer (or the seller) making a profit.
[edit] Example Sites
[edit] Strategy
Assuming there was an optimal strategy for unique bid auctions, all players would come to the same conclusion about what the optimal bet(s) should be, thereby invalidating the same strategy. Therefore, by proof by contradiction, there exists no optimal strategy for a unique bid auction in the general case.[citation needed] <-- agreed! -->
