Penny Auctions
curiousgnu.com
curiousgnu.com
It's a game of chicken. The earlier bids are a sunk cost. You hope you can spend an extra $1 to win the $20.
Sounds insane to even start bidding, right? But then you see things like this play out all the time in the market. For example, the war between Blu-Ray and HD-DVD had a very similar dynamic.
I'd be delighted if you could provide some sort of source or citation for this claim as I find it fascinating. Thanks.
1] War of Attrition game: Maynard Smith, 1982, 1988; see also Dawkins, 1976/1989.
2] Loss aversion: Kahneman & Renshon, 2007; Kahneman & Tversky, 1979, 1984; Tversky & Kahneman, 1981. Sunk costs in nature: Dawkins & Brockmann, 1980.
3] More lethal wars last longer: Richardson, 1960, p. 130; Wilkinson, 1980, pp. 20–30.
4] Weber’s Law for perceived deaths: Richardson, 1960, p. 11.
And a couple of relevant quotes:
> In these simulations, the destructiveness of a war depends mainly on the territorial size of the combatants and their alliances. But in the real world, variations in destructiveness also depend on the resolve of the two parties to keep a war going, with each hoping that the other will collapse first. Some of the bloodiest conflicts in modern history, such as the American Civil War, World War I, the Vietnam War, and the Iran-Iraq War, were wars of attrition, where both sides kept shoveling men and matériel into the maw of the war machine hoping that the other side would exhaust itself first.
...
> I already mentioned some evidence from Richardson’s dataset which suggests that combatants do fight longer when a war is more lethal: small wars show a higher probability of coming to an end with each succeeding year than do large wars. The magnitude numbers in the Correlates of War Dataset also show signs of escalating commitment: wars that are longer in duration are not just costlier in fatalities; they are costlier than one would expect from their durations alone. If we pop back from the statistics of war to the conduct of actual wars, we can see the mechanism at work. Many of the bloodiest wars in history owe their destructiveness to leaders on one or both sides pursuing a blatantly irrational loss-aversion strategy. Hitler fought the last months of World War II with a maniacal fury well past the point when defeat was all but certain, as did Japan. Lyndon Johnson’s repeated escalations of the Vietnam War inspired a protest song that has served as a summary of people’s understanding of that destructive war: “We were waist-deep in the Big Muddy; The big fool said to push on.”
This in no way demonstrates a belief that both sides thing they are made of tougher stuff. In fact, it says explicitly that both sides are "hoping" that the other side "collapses first". This is in no way indicative of any self value of positive strength and thus a premise of your argument is false. Therefore you conclusion is false. If you would like to submit another attempt at providing reasonable evidence to back up your claims, I'm more than happy to review them.
It's simply in the rules that you must pay if you're high bidder #2, even if you pull out.
Basically, it will immediately devolve into the two highest bidders each bidding over each other, in an attempt to not be the one who has to pay money and get nothing at all in return. At some point, one will have to take the fall and accept that they've lost money with nothing to show, and the other will also have lost money, just slightly less. Both people lose.
Everyone else sits there happy that they avoided being one of the two highest bidders.
In the penny auctions, however, you can have multiple people who have spend hundreds or thousands of dollars on this stupid auction, who all hope that at least if they win, they'll get something in return for their losses.
One key thing the author left out was "free bids". You can win auctions that give you bids. So, for instance, you spend 10 bids and get lucky and win a 2500 bid pack. When bidding on the auction, an outside observer can't tell if you're using a bid you paid for or a "free bid" you won on the site or gained in some other mean (some auctions may be a product + free bids). So while it looked like the guy spent $3,500, he may have only spent $100 of his own real money.
Some sites even stop you from spending over the retail value of the site. The one I worked for let you buy the item if you spent bids that equaled the retail value. And we were fair with the retail value of items. We had people whose job it was to source products so we could afford to sell items at retail. If you lost the auction, you could also pay the difference between the value of your bids and the retail price and buy the item that way. So if the item was $150, and you spent $100 in bids but lost, you could pay $50 and get the item anyway.
Yes, some of these sites use bots. You can buy pre-built penny auctions sites and you will see they contain bots. The site I worked for never used bots while I worked there. I'd be surprised if any of the bigger sites use bots, as it's not needed and can be pretty obvious to detect with basic statistics. And you definitely have a certain type of person on this site who is running statistics and trying to beat the game.
These sites can actually be used to find a good deal, if they offer the retail option I mentioned above. Imagine you plan on buying a 65" TV. You try out a penny auction site and win it for $100, or end up having to pay retail for it anyway. The main loss would be paying shipping, which admittedly for a TV would be a lot. Personally, I never used one of these sites. It's just too stressful and slow for me (auctions can last for hours).
Letting people get it "if they spend the retail value" is hardly generous or benevolent. Other people will have also spent a bunch of money, and if you haven't already spent a ton of money and the total spent on the auction will be outrageous. Never mind that if you don't spend the retail amount, you're just out money for nothing.
Unlike a legitimate auction site where if you don't win the auction you don't spend anything.
But most people are curious, try it out, lose some money, and quit.
Not sure I'm entirely fond of the idea but it just seems like yet another borderline form of gambling to me, and no morally worse than the rest.
However, it definitely feels more like gambling than a fair or straight auction to me.
What you're really doing, then, is creating a simulated auction viewing experience which participants can watch or participate in. If a real person actually ends up buying something, you just go out and purchase it on Amazon and ship it to them.
Amazing that this isn't considered a scam by the authorities.
Enforcement in this area is largely complaint driven, and the target market for these sites is, I gather, generally not the most aware of their rights and likely to complain.
And, the sites may have favorable internal dispute resolution processes that assure that the kind of people that would complain are kept happy, so that complaints to government authorities don't happen.
https://youarenotsosmart.com/2011/03/25/the-sunk-cost-fallac...
He's bidding penny by penny, so once he's at $180 (the cost of the tablet) he's not getting them back. So he might be thinking "OK, it's more expensive that in a shop but the $180 being lost already I might as well put one more penny. Then one more. Then one more." etc.
Basically, many people prefer to make a bad deal, or take an otherwise bad decision than recognizing that they just wasted money for nothing.
If you think that amount is more than $180 and you continue to play, because you've already spent $180, that's the sunk cost fallacy.
If you think that amount is less than $180, continuing to play is (to a first approximation) the correct decision. You can either get a tablet for less than $180 here, or for $180 in a shop; also, you've just burned $180. If you were to stop playing, in order to avoid committing the sunk cost fallacy, that would be the sunk cost fallacy fallacy.
It seems likely to me that the mistake being made, after spending $180, is the same mistake that causes people to start playing in the first place. (I couldn't say precisely what mistake that is.)
In this case, the sunk cost fallacy is what would drive them to keep going, even once they've realized what a terrible trap this "auction" is.
I'll give you a whitelist instead of a blacklist. Unless you're seeing expensive, national ad campaigns from a given penny auction site and they are based in the US, more likely than not, there are no actual goods to be won. Even then, many use shill accounts to keep the bidding going until the item has reached the desired profitability from real, paid bids.
One of the features of these sites is that they will put up credits on the site as an item for bid. So the person who spent "$3500" bidding might have won a "10,000 site credit" auction at some point for $190.00 "winning bid" where a bunch of people actually spent "$50,000" on it. Which in turn might have had some site credits involved, etc.
These sites have been around for a while now and the fact that they've never been regulated is a great sign of how dysfunctional our government is and its inability to protect poor people from being ripped off.
You should sometime in your life learn "If it's too good to be true, it probably is".
See a $180 tablet for $18? Assume it is a massive scam. Only after a TON of googling and talking to people should you even consider it, but even then, it is too good to be possible and you should just skip it. Either save the $180 to buy the real thing, or don't have one.
So many scams are not possible of the end user is not greedy. Nigerian Prince, etc. etc.
Then our society has collectively failed in educating them. We could just let everyone fend for themselves and eat the weakest, but I don't mind my time and money directory or indirectly going towards helping others. Call it altruism.
You can forcefully take something from a person, you can never forcefully give them anything. Stop with the delusions.
Social Darwinism, with the implication that the weak are exploited and left to rot, is widely seen as an awful idea.
It does not explain economic/memetic evolution. Ideas can be created by one person working alone, or millions working in concert, even asynchronously, where someone might synthesize a line from the epic of Gilgamesh with a line by an 18th century poet, a drawing from a 19th century industrialist, and an article by a 20th century biologist, to create something useful to a 21st century customer.
As humans now employ that mode of development, we do not need to produce offspring to test the fitness of a new strategy. It is actually in our best interest to throw every conceivable idea at the wall to see what sticks, yet still preserve every failed idea on the off chance that it could be made to work under different circumstances.
We use specialist economics now. Every person, no matter how fit, can still advance human society as a whole by exclusively doing the one thing they are best at, and trading for everything else. The only limiting factor is the cost of keeping a human body healthy enough to perform useful labor. Because of that, the endpoint of specialist economics is single-purpose machines performing all labor, and humans inventing new labors for the machines to perform.
Stephen Hawking is fit enough by genetic evolutionary standards to have three children. But by memetic evolution, he has thousands of students that have read his work, and millions who know just a bit more about the universe--and black holes in particular--as a result of it. Without the support assistance of human civilization, he would have died long ago. It was in our best interest to hook him up to whatever machines were necessary to let him do the one thing that he could still do best: think.
Therefore, there are no unfit organisms to be culled in a civilization of generalists who may reprogram themselves into specialists. Every living human can dream up something new and unique that can be done. But our knowledge and creative capacity is finite. Every moment of effort spent solving and re-solving the problems of human necessities cannot also be spent dreaming up ideas not immediately relevant to survival or happiness and researching them into reality.
If we had more people allowed to dream and do, instead of pressing their faces to the grindstone, we would have more impossible dreams coming true. And some of those dreams will coincidentally benefit the Darwinian fitness of all Earth species, because they will become multiplanetary species.
This is why Social Darwinism is crap. We have not only horizontal meme transfer, but vertical as well, from written records. Every new idea may be combined with any, all, or none of the old ideas. This creates a combinatorial explosion of possibilities, where the unfit ideas must be culled, not the unfit thinkers. This means that it is in society's best interest to debunk lies, unravel obfuscations, and aggressively destroy deceptions as early as they may be detected, lest they become an immortal influence on all ideas that will follow.
Proof that this fools people easily can be seen in the credulous linked article.
Poker and sports betting are considered gambling despite being sufficiently complicated processes st. a small minority of participants achieve regular profits against virtually any field. I would be happy to bankroll Phil Ivey to play poker Tony Bloom to bet on football.
https://en.wikipedia.org/wiki/Phil_Ivey
https://en.wikipedia.org/wiki/Tony_Bloom
Both low-bid and penny auctions seem much simpler to me. I can't see how consistent profitability is achievable when playing with non-crazies?
http://www.lotteriinspektionen.se/sv/Icke-tillstandsgivet/La...
Lowest-bid auction: "In a lowest bid wins the auction it alone in having placed the lowest bid and not the one who placed the highest bid. In this way, it is largely a matter of chance decides who wins. We therefore believe that the lowest bid auctions are a lottery and not an auction."
Penny auction: "In our opinion this is not a lottery in the legal sense, because it is the highest bid within a certain time "wins". It is not chance that determines who gets the goods. In this way, a penny auction works the same way as a normal auction."
(Google Translate, may do a proper translation later.)
Or, as pointed out in the article occurs with penny auction sites, when some bids actually drop the price rather than raising it.
I don't understand what you mean, here. Are you saying that stocks never went to zero? Because real stocks also don't go below zero (though you can use leverage to lose more money than you put in, I suppose).
Looking back now on that stock trading game, especially because it had a fixed window of time, it really favoured taking the big risks with these penny stocks. You weren't playing with your own money, and you weren't playing the long game either as there was a time you were effectively cashed out. I'm not sure that's the sort of wise saving & investing for the long term that one should be teaching teens/children. It's more for the ASX itself to train another generation of traders, which will make the business richer.
https://blog.codinghorror.com/profitable-until-deemed-illega...
In recent memory, there was one penny auction site that was essentially a justification for a ponzi scheme, where people were buying thousands of dollars of "bids" (not using cc, but cashier's checks and money orders. i.e. non-reversable funds) because there would be riches of payouts on the other side.
It's entirely probable that it's scams all the way down.
May or may not have been rigged in their favor.
However, if the collusion site is made popular enough that a majority of users are on it, then the house cheating is much easier to spot.
It's pervasive in this type of site.
Why has eBay never implemented this behavior?
Also, I think they found most people really don't want to spend all day sitting in front of a screen trying to buy something. 'Buy It Now' was a really big deal for eBay, it makes up an increasingly large percentage of their revenue. [1]
[1] - https://assets.bwbx.io/images/users/iqjWHBFdfxIU/i1sfM8mxJpc...
Because it discourages people from bidding the maximum price they are willing to bid up front, increases the sensitivity of the whole system to short-term communication problems, and denies both bidders and sellers a firm end-time.
It really only makes sense if you are running a system which is designed to make money off the number of bids, and which artificially restricts bidding to maximize the number of bids.
eBay uses a second-price auction system. Each bidder is allowed only a single bid, which reflects the absolute maximum that they are willing to pay. The highest bidder wins the auction, but only pays as much as the second highest bid. The value of the actual highest bid is kept secret, so the "current bid" displayed on the site is actually the second highest. If you try to win an auction by outbidding the "current bid" by 1 cent at the last second, you will succeed only in becoming the second highest bidder and pushing the price that the actual highest bidder has to pay up by 1 cent.
Its been a while since I bid in an eBay auction, but this is or was definitely not the case. If you were outbid, you could bid more.
Your best shot would probably to be just to sit there and collect a shitload of statistics about under exactly what circumstances you're most likely to be the final bidder, and then only bid under those circumstances... and then hope nobody else has been collecting the same statistics and coming to exactly the same conclusion.
Say agents pre-commit to bid or not in discrete time periods, one Nash Equilibrium would be symmetrical mixed strategies such that each agent has 0 expected payoff from bidding.
Eg if 10 players, $0.4 fee and $0.5 bid then would need players to bid with probability p st:
0.9 = 180 *(1-p) ^9.
This changes if agents value winning more/less than $180 in present/future (patience, risk neutrality, value placed on tablet + process of playing gambling game).
Thinking a bit more about this, the real time bidding aspect isn't really a problem. You do need to know how many other players there are now/in the future though.
Symmetrical strategies:
bid_cost(t) = object_value * (1-p(t+1))^N-2 for all t, for all agents not currently winning auction is a MSNE.
He never shared his methods, but did say that one of the most important considerations is the target audience of the item in question and at what times they are likely to be bidding. You can glean that information by continuously observing many ongoing auctions.
The basic strategy was "hold off until people have stopped bidding, then put one bid down. If it doesn't work out, go have a picnic in the park and try again later."
This may have been before such sites offered pre-configured bots.
The only winning move is to be the house.
There is one small vulnerability in the website they tested, which is that when the system senses player exhaustion, it sinks the price to attract new players. It happens twice at the end of the graph. When the price is on a downward slope going past a certain point, it probably means that few players intend to pursue.
I understand on a rational level that this is less fair to bidders and a bad model if you want to just buy things, but I don't see where this is a game of chance instead of a consequence of who is participating.
I suppose because you pay a small amount of money and you may or may not get something valuable out, which makes it effectively gambling from the bidder's point of view.
> but I don't see where this is a game of chance instead of a consequence of who is participating
From the point of view of an individual bidder, "who else is participating" is a matter of chance.
Penny auctions involve naming a price, purchasing a bet nobody else will name a valid price after you, and you receive the item only if your bet wins, in which case your "prize" is actually an option to buy the item at your named price.
What's ridiculous beyond belief is that the "skill level" involved is sufficient to make it not gambling when poker is a regulated game...
"A person engages in gambling if he stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he or someone else will receive something of value in the event of a certain outcome." [1]
This is not a contest of chance, and there is no future contingent event. Other participants future actions within this event do not count as a "future contingent event."
It's absolutely a contest of chance. There's no skill at all, you're betting on the probability nobody else will bid in the next 15 seconds.
If this is considered a game of skill I have no idea how you could defend sportsbetting or poker being gambling
Assuming the house is not cheating and using shill accounts (which does happen, but IS illegal) then the last person to continue bidding wins. So in that regard it is by definition not chance. You just continue to bid until no one else bids and then you win.
There are many different legal definitions of gambling (even in the US -- each state that regulates gambling has at least on definition of its own, as well as the feds, and the same jurisdiction may have different definitions in different laws) but the one you posted upthread requires only that the future contingent event on which one participant is at risk be out of control of that participant, not that it must be "exogenous to the participants".
This is the crux of your argument, but your link doesn't seem to address it. Do you have another source?
More importantly, these penny auctions lack is transparency. The argument is that they're not gambling because it's a game influenced by skill, but for that to be true you would need transparency into who many bids have been made, by which people, with what timing. This doesn't appear to be possible without running an aggregation script.
Each time someone makes a bid on your penny auction have the bot automatically make a pretend bid using a fake user. When people finally stop bidding, make a final bid from another fake user that has never bid before and win the auction for $0.80.
You don't even need the iPad!
Does the winner have to pay the existing bid total too, or do they benefit from the spending if other bidders?
Wikipedia has a better and more complete explanation: everyone pays, both for bids and the total: https://en.wikipedia.org/wiki/Bidding_fee_auction
Them saying "this tablet is up to $11.42" just means "there have been at least 1142 bids for this tablet", (assuming "penny" is "one cent", I never could learn the weird American names for the small currency).
On top of this system is overlaid a decimalized imperial notation, the octal Spanish system, and a materials system. Thus penny=cent; nickel was used for five cent pieces; a dime is 1/10th a dollar; quarter is 25 cents (two bits; a bit is a dime and five ha'pennies), etc.
The problem is that the US was one of the first countries to "decimalize" (including defining the actual measures, which were not defined previously) in the 18th c., and chose to reuse the old names.
As to our measures: weights and areas are base-4 (which made manufacture of the standards easier); length is based on easily divisible numbers for common lengths; official measure is done decimalized (thus the notorious "decimal inch"). The foot is based on the second, which was fundamentally superior to the meter which was based on the earth's geodesy for practical matters, etc.
It could also be about "trying to exploit others' RNG" or more aptly "trying to exploit the tendencies of other competitors."
If I entered as a human participant I would get crushed.
So if someone used the metastrategy of entering a shill competitor that always chooses rock, in a field where everyone else is perfectly random, then a true competitor that always chooses paper would win the competition. Without the shill, the winner would be random.
Therefore, you have to assume there is at least one strategy in the competition that can be consistently beaten, and that perfectly random players cannot be beaten by strategy and are therefore ignorable as part of the overall field. So the winning metastrategy is to design a non-random, yet unpredictable strategy.
As I recall, "Iocaine Powder", which created an internal model of the behavior of the other players and then played to beat the model's prediction, was an early dominator. There have also been players that won by "cheating", such as by examining the stack of the other player's program. Either way, the best way to win is to read your opponent's mind.
So after Iocaine Powder wins, the next year's competitors could put a copy of it into their programs, so that they can detect whether Iocaine Powder 1.0 would be able to play to beat them and then change their play to something else. Meanwhile, Iocaine Powder 2.0 also has a model of Iocaine Powder 1.0, and whenever it detects that someone is playing to beat IP1, it plays to beat that instead.
After several years, everybody knows that everybody knows that everybody knows that everybody knows that everybody knows that you were going to play rock, so I was going to play paper, so you were going to play scissors instead, so I was going to play rock instead, so that you had to play paper, so that I had to play scissors, so you end up playing rock. It's way more complex than "international rock-paper-scissors competition" makes it sound. If a human competitor entered, the bots should be able to predict what that person would order for lunch for the next week. It's crazy.
It would also be very silly.
It's very clearly gambling as you cannot influence the result once you've placed the bet.
You can place your bet with knowledge, despite not being able to influence the result.
See also: poker, insider stock trading, etc.
Edit: Given that they have bots stealing the items, I don't think this is actually gambling--it's actually just entirely wasting money.
If it worked as-presented, I would say there's a marginal amount of skill involved, which would have its effect magnified over time, as happens in poker.
There is just no way that Arsenic is legitimate.
Theory 2: "Arsenic" laundered $3500.
I'd wager a penny it's #2.
It's all a scam tho imo.