# Dollar Auction

Dollar Auctions

A dollar auction is a thought experiment in economics in which someone auctions a dollar under the following terms: You can bid any amount you want, you can win a dollar for a cent, but if you make the second highest bid you still pay up.

Implications

Using the economic “perfectly rational” actors things get quite pricey.

Initially it makes sense to bid \$0.01 to win \$1
When someone else bids \$0.02 it’s still a good proposition to bid \$0.03 to win \$1
This continues until someone bids \$1. At this point the other bidder is looking at bidding \$1.01 for \$1. That’s a clear loss. But it is only a loss of \$0.01, compared to a loss of \$0.99 for stopping now. So a higher bid is still rational.
This continues until…actually it just continues. There’s no until. The dollar will sell for infinity dollars.

In economics this is a criticism of a particular means of conceptualising “perfectly rational” actors and the suggestion that the idea is flawed or at least needs some refinement. But we’re not economists.

Auctions in Games

Board games have been using auctions for a while. They’re a really neat mechanic since they sidestep a lot of balancing issues.

If something is auctioned the players are setting the price. You don’t need to say “Card A costs 4 and card B costs 5” and risk having valued those cards incorrectly. You just auction them off and the players will set the values. This is particularly powerful because it is sensative to the meta-context of the game – some things can be impossible to set costs for becuase their value changes dramatically depending on what else is in play, the state of the game and (sometimes) the sort of people playing.

There are two popular models for auctions in games:

Traditional auctions, in which players take it in turns to bid higher and higher until everyone but one player has backed down. They pay and get the thing, while everyone else takes their money back. Like you’d do in Monopoly or Power Grid. (I probably don’t need examples to illustrate this point but something tickled me about being able to use those two together)

Blind auctions, in which players simultaneously choose how much they’re going to bid and reveal all at once. All of the bids are lost, but only the highest bidder gets the thing. Or in some cases players are bidding for something akin to turn order and everyone is placed relative to their bid.

I can’t think of an example of a game that uses a dollar auction model in which the second place (or more) players lose their bids.

Could it work in a game?

Almost certainly someone has made it work and I’ve simply not played the game or games where it does, but let’s speculate anyway 😉

The good news is that it creates a complex situation in which there’s not an obvious dominant strategy. If all players but one refuse to take part in this sort of auction the player who does is at a significant advantage. If everyone but one takes part the one who stays out has a definite advantage. Optimal play with this sort of auction will be based on meta-knowledge of what the other players are likely to do. It’s also somewhat fertile ground for table talk and informal agreements beyond the structure of the game. Some players hate that, but a game that sets an expectation that it is to be played that way can attract players who don’t.

The bad news is mostly loaded into the difficulties of making it fun to lose these sorts of auction. Inherently the player who comes second will lose resources, potentially a lot of resources, and have nothing to show for it. It’s important this not remove them from being in a position to make meaningful decisions in the game. There’s also the danger of a run away winner where someone says “I have the most shinies, I am going to outbid anyone who tries to get this thing, so if you bid you will lose money for nothing, therefore you will not bid and I will get it for one shiny. With everything costing me one shiny it is easy for me to have the most shinies forever.” In theory a strategy like that could be broken where other players cooperate to break their strangehold on the “most shinies” position, but such cooperation is difficult where’s an intrinsic motivation to be the contributing member who contributes the least.

What would the working game look like?

I think there’d be two main ways to mitigate the problems auctions like this could cause:

The first would be to make a game in which the thing players are bidding with refreshes frequently. If you had 10 coins a turn to bid and couldn’t carry them over from turn to turn then nobody could maintain a “most shinies” position and someone who lost everything to get nothing is back in the action fairly quickly.

The second would be to make a game in which the social dynamics took centre stage and other game mechanics were supporting the making and breaking of alliances in a way that mean someone who bid second and lost *was* getting something meaningful. They were knocking down the money available to the winner which is somehow good for their alliance and good for them.

Is it a good idea?

Maybe! I don’t know. The point of the blog is to discuss design ideas, see what it inspires and get used to thinking of mechanics in different ways. In that it’s been an interesting topic to divert onto for a few minutes 🙂

## 1 thought on “Dollar Auction”

1. If I remember correctly, Age of Steam has something similar to the dollar auction. Well, not VERY similar, but it incorporates the aspect of players without the high bid still paying.

As I recall, the winner of the auction, the highest bidder (and maybe the 2nd highest bidder, I’m not sure about that), pays their entire bid, and gets first (and second) pick of bonus for the turn. The lowest bidder pays nothing, and of course gets last pick of bonus. Everyone else pays 1/2 their bid and their turn to pick a bonus depends on when they dropped out of the auction.