Unique bid auction

From Wikipedia, the free encyclopedia

Unique bid auctions are a mix between an auction and a lottery. 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 the only one of that value. To facilate this, such auctions will accept bids that are specific to the pence.

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 (less costs), 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 a fee for each bid). They are currently legally classified as skill-based prize competitions.


Contents

[edit] Variants

The two most common types are HIGHEST unique bid and LOWEST unique bid auctions.

In a HIGHEST Unique bid auction, a limit is set for the maximum price that can be bid. When the auction closes, the bid with the highest price that no one else has bid wins the auction.

In a LOWEST Unique bid auction, the minimum price you can bid is typically set to £0.01. When the auction closes, the bid with the lowest price that no one else has bid wins the auction.

[edit] Examples of unique bid auctions

The following is an example of the highest ten bids in a HIGHEST Unique Bid auction, with a maximum price limit set to £10:

£10.00
£10.00
 £9.99
 £9.99
 £9.99
 £9.98
 £9.97
 £9.96
 £9.96
 £9.96

The bidder who placed the bid of £9.98 would be the highest unique bid and therefore the winner.

A LOWEST Unique Bid auction would work in the same way, except the bidder with lowest unmatched bid at the close of auction would win

In a typical real example of a HIGHEST Unique Bid auction, a car worth £20,000 might be offered to bidders at a maximum bid price of £100.

If the auctioneer charged £10 a bid then they would need to get over 2,000 bids to cover the cost of the car. (For simplicity, this example does not take into consideration any costs for running the auction or processing payments). If at close of auction the HIGHEST Unique Bid was £20, the successful bidder would be able to purchase the car for 0.1% of its worth.

[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! -->

However, in the case of some unique bid auctions, initial and ongoing bid status messages are provided to the bidders. These messages inform the bidder if their bid is unique or not, with some information of relative positioning. This may provide some bidders to actively influence the outcome of an auction.