explain this penny auction?

EDIT:

http://en.wikipedia.org/wiki/Penny_auction

Interesting concept. The game theory aspect of it is very interesting.

But, no. IMO it is not gambling. No more than ebay is. Yes there's a fee for purchasing bids, but it seems most places don't have a seller's or final buyer's fee, so they have to make money somewhere.

Gambling:

Gambling is the wagering of money or something of material value (referred to as "the stakes") on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods.

Because there is not an element of luck involved with the auctions, as you can always be the top bidder, then it is not gambling. But it's close.

You pay for each bid even if you lose the auction , that's where they make their money .

Ripoffs IMO.

Yeah, from what I read, losing bidders can possibly end up paying more for not winning than the retail value of the item.

It's not gaming, as you are attempting to purchase items. There is no element of luck involved. Every aspect of the event can be controlled by the "player". If it is gambling, then all auctions would be considered gambling. Ebay, Christies, etc.

Moved to players lounge, not really a poker topic

Luck is involved in the sense as who do you get as your opposing bidder (and the deepness of his pocket ). You are wagering your bid to be the highest (uncertain outcome) , at E-bay you don't wager anything , bidding is free .

Originally Posted by B2BAces

Luck is involved in the sense as who do you get as your opposing bidder (and the deepness of his pocket ). You are wagering your bid to be the highest (uncertain outcome) , at E-bay you don't wager anything , bidding is free .

Using that logic, the 100m dash is gaming and is luck based since I have no control over who my opponent is.....

And Ebay, the bidding is not free, per se. The sellers usually build the cost of the auction into their prices. Kinda like a hidden tax. But thats kinda a tomato tomato thing. (That's doesnt play as well typed out lol)

There is no factor that's not controlled by the 'player'. IF you want to be the top bidder... you just sit there and keep bidding until you win. Especially since from what I read, most of them add time after each bid. Theoretically, you could never lose the auction.

The EV aspect of it is a different question. This is actual a form of a game Theory Brinkmanship game.

The classic example. A Game Theory lecturer I listen to offers $100 to the highest bidder, during his lectures. He starts in $5 increments. The winner gets the difference between his bid and the $100 paid to him. The catch is, the second highest bidder must ALSO pay his bid to the lecturer. The lecturer has never seen a winning bid LESS than $300. So not only does the loser pay the lecturer, but now the 'winner' owes him $200 too. (I'll see if i can find a transcript of this, or a non-copyrighted youtube)

The idea of a brinkmanship game is to push as far as you can, while not taking a loss, and hopefully making a profit. The problem is, if the penalty for losing far outweighs the cost of winning, you don't stop. IN the previous example, I think the math dictated an optimum EV bid of like $30. But the second place bidder can't really stop, because he loses more EV by not bidding again.

The Cuban missile crisis was a prime example of the brinkmanship game. Each side kept pushing and pushing, until they realized they were stuck. Neither side could lose face in it's public's eyes, so most of agreements were kept secret. They had discovered the point where "making another bid" was going to cost them more in EV than folding.


Thank you OP, I enjoy this type of post.

@Josh:

I don't think it's spam, as it's clearly on topic of a unique topic. Having those links may help enlighten some people.

I would be curious to see some data on your bids Josh. MSRP vs bids and their costs, etc etc...