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Penny Auctions
- zekevermillion 10y agoI remember a game circa 1980s called Inside Trader, a stock market "simulation". There were a bunch of fake stocks that fluctuated in value randomly, and one could choose to trade honestly or based on tips. Tips carried the risk of penalties and jail (losing the game). I eventually figured out that while the prices did go up and down, they never went below zero. Therefore, one could trivially beat the game by purchasing penny stocks. Unfortunately, the real market does not have a meaningful lower bound on losses.
- jrs235 10y agoI loved that game! I believe my family obtained their copy via a bundle called Top Ten Solid Gold Hits!
- zekevermillion 10y agoYes! That rings a bell. I really miss my old IBM PC. 20MB of drive space and a lot more fun than I've had since, plus it taught me how to make money on penny stocks --har har.
- x1798DE 10y ago> Unfortunately, the real market does not have a meaningful lower bound on losses. 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).
- gnopgnip 10y agoReal stocks get delisted or go bankrupt all the time.
- hueving 10y agoThat's 0
- zekevermillion 10y agoOK, the lower bound on losses you can make on one stock purchased without leverage is == your investment. With repeated activity and/or leverage, there's no hard limit.
- zekevermillion 10y agoThey would go to 0.01, but there was no insolvency in the game (also no leverage, if memory serves).
- daemin 10y agoThere was a similar trading game that I played on the ASX (Australian Stock Exchange) when I was in High School. I tried to do it by just buying regular stocks, but when I looked at the leaderboard the people at the top were always buying 100,000's of a penny stock and selling when it went up. So they could win or lose the game based on luck and how much they bought of that particular penny stock within the game window. 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.
- grantcox 10y agoIf one bidder spent more than $3500 in bids for that tablet, it's either a shill account or a credit card scammer. Neither one is particularly surprising with sites like this.
- Trundle 10y agoThere's no chance these things aren't riddled with shell accounts bumping the price up and also winning.
- tonteldoos 10y agoMaybe that business model is worth a look as a SaaS...
- TheOtherHobbes 10y agoMore like FaaS - Fraud as a Service.
- lrem 10y agoNote: the actual winner of the auction in question spent 80 cents.
- gambiting 10y agoWhich could also be a bot account owned by the site owner. That way they keep all the money and don't even have to buy the device.
- tominous 10y agoThis is like the old trick of auctioning off a $20 note with the twist that the two highest bidders must both pay even if they end up losing. I saw this play out in a Negotiation 101 tutorial once, for real money, and the bid got up to $40 or so before one person finally bailed (i.e. around $80 spent on a $20 note). It's a game of chicken. The earlier bids are a sunk cost. You hope you can spend an extra $1 to win the $20. Sounds insane to even start bidding, right? But then you see things like this play out all the time in the market. For example, the war between Blu-Ray and HD-DVD had a very similar dynamic. EDIT: See https://en.wikipedia.org/wiki/Dollar_auction https://en.wikipedia.org/wiki/Dollar_auction
- rictic 10y agoYep. Very similar patterns show up in the decision making and politics that drive the deadliest wars as well. Apparently it is very easy for both sides to convince themselves that they are made of tougher stuff than their enemies and that if they can just bear down and take the losses they'll come out on top. 1] https://en.wikipedia.org/wiki/Attrition_warfare https://en.wikipedia.org/wiki/Attrition_warfare 2] https://en.wikipedia.org/wiki/War_of_attrition_(game) https://en.wikipedia.org/wiki/War_of_attrition_(game)
- tlow 10y ago"very easy for both sides to convince themselves that they are made of tougher stuff than their enemies" I'd be delighted if you could provide some sort of source or citation for this claim as I find it fascinating. Thanks.
- deleted 10y ago[deleted]
- grenoire 10y agoHaving seen all the gambling site scams for Valve games (see CS:GO streamers faking wins on their affiliated websites), it would come to me as no surprise that they are abusively pushing users to bidding wars by counterbidding 'fake money.' If they win the bet themselves, they can always reauction the item at a later date.
- lrem 10y agoHow does one person spend 3500$ on a 180$ tablet: write a bot. You tell it to "buy any item at ≤10% retail price if the remaining time is ≤1s". Sounds reasonable, even if you pay a few cents for the losing bids, right? ;)
- staffanj 10y agoIf you bid when there is 1 second left the timer starts over - you cant snipe penny auctions.
- imron 10y agoHow does one person spend 3500$ on a 180$ tablet: write a bot. 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!
- dsr_ 10y agoThe penny auction site usually provides the bots, too. "$1 per auction, use this automatic strategy."
- bpicolo 10y agoMore likely yet, it's a fake user that beezid runs to drive up the price
- ryporter 10y agoWhile I certainly think that Penny Auctions are less than useless, I really don't see how they can be classified as gambling. I think that the salient point here is that there is no element of chance. Sure, you don't know how your opponents will behave, but you also don't know how your opponent in a chess game will behave. The nondeterministic behavior is not endogenous to the game itself.
- tempestn 10y agoBy that logic online rock-paper-scissors is a game of skill too.
- menage 10y agoIt is! See the International RoShamBo Programming Competition: https://webdocs.cs.ualberta.ca/~darse/rsbpc.html https://webdocs.cs.ualberta.ca/~darse/rsbpc.html
- mamon 10y agoHmm, the little I know about game theory, wouldn't that competition actually be about "who writes the best (most uniform) random number generator?"
- mod 10y agoIt could be, if they were all trying to be random. 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.
- logfromblammo 10y agoIf I recall correctly, an effectively designed strategy performs at least as well as a random number generator when playing against a random player, and can do better against a non-random player. 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.
- riceslush 10y agoAny sufficiently advanced technology involving money is indistinguishable from gambling.
- pjc50 10y agoIt appears that some countries have spotted this: http://www.pennyauctionwatch.com/2010/04/italy-shuts-down-lowest-unique-bid-auctions/ http://www.pennyauctionwatch.com/2010/04/italy-shuts-down-lo...
- Kiro 10y agoLowest-unique bid auctions and penny auctions are different things though. The former is often considered gambling while the latter not.
- oli5679 10y agoDo you have any idea why that is? 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/Phil_Ivey https://en.wikipedia.org/wiki/Tony_Bloom 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?
- Kiro 10y agoGood question. This is what the Swedish Gaming Board says about it: http://www.lotteriinspektionen.se/sv/Icke-tillstandsgivet/Lagstabud-auktioner/ 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.)
- wiredfool 10y agoIt's entirely possible that it's scams all the way down. 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.
- foota 10y agoInteresting it seems that running for a political office is a type of penny auction.
- acjohnson55 10y ago"All-pay auction" is the technical term, a penny auction just being a particular instance. In politics, the person who spends the most doesn't necessarily win, but I can see the analogy. https://en.wikipedia.org/wiki/All-pay_auction https://en.wikipedia.org/wiki/All-pay_auction
- foota 10y agoTrue. Perhaps it's closer to a lottery, the more you put in the greater your chances are that you win? (though not of course per dollar)
- DoubleGlazing 10y agoSeems like a good way to launder money.
- metafunctor 10y agoIn game theoretic terms, is there a best strategy for a game like this, other than not playing?
- deleted 10y ago[deleted]
- igf 10y agoI don't know if game theory is the branch of mathematics that can help you out here. Game theory usually rests on matters of "If I do X then my opponent(s) will do Y", but in this situation you don't even know how many opponents you might have. 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.
- CipE 10y agoAssuming a constant cost per bid, given that every time you put in a bid you lose money, and the site owner can always get a guaranteed win, you need to minimize the number of bids you make: Optimal number of bids is 0. Since we're constrained to play, bid once. (It doesn't matter when, you won't win).
- oli5679 10y agoThis game is difficult to formalise because of the real time bidding aspect. 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).
- oli5679 10y agoEdit: 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.
- lubos 10y agoRelevant: Profitable Until Deemed Illegal (2008) https://blog.codinghorror.com/profitable-until-deemed-illegal/ https://blog.codinghorror.com/profitable-until-deemed-illega...
- rtpg 10y agoWhat's the argument that this is gambling? Or rather, that this is gambling while eBay is not? 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.
- feider 10y agoI would argue that it depends on how predictable the output is for a given system that determines if it is a gamble or not. A simple rule system with numerous agents can produce output that is really hard to predict.
- igf 10y ago> What's the argument that this is gambling? 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.
- martin-adams 10y agoIf eBay is gambling, then buying a house and upping my offer against someone else should also be considered gambling.
- notahacker 10y agoeBay involves naming a price for an item, which you pay only if your price is accepted and you receive that item. 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...
- edu 10y agoHere you pay for each bid, so you pay whether you win or not. AFAIK in eBay you only pay if you win the auction.
- chii 10y agoIt would be interesting if someone created a site that helps users of these penny auction sites collude. Imagine, if the site queued up each user as they registered, and the user as the head of the queue gets a guaranteed win on the item because everyone else stops and don't bid... So if you wait in the queue long enough, you'll get your turn and get the item really cheap.
- bitJericho 10y agoexcept you'll find the house cheats.
- chii 10y agoTrue, you can never really verify that the house is cheating either. 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.
- mfjordvald 10y agoI once found a security problem in a site that exposed bid data for on-going auctions. I very much verified they were completely fraudulent and would magically bid to win in the last couple of seconds. It's pervasive in this type of site.
- chinathrow 10y agoWow, I would love to see someone filing suit and seeing them subpoenad to discover the shill accounts linked to it. There is just no way that Arsenic is legitimate.
- thalesfc 10y agoExcellent content. I was surfing your web page and it seems ridiculous interesting. Tomorrow I will read everything, do you make all your source code available ?
- tonteldoos 10y agoI'm not the author of the article...I only found and submitted to HN...
- barrkel 10y agoI feel like there's a bit of explanation missing in this article. It only seems to make sense if bids cost a penny at the time they are made, rather than needing to pay at the time the auction is won. Is that the case? 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 https://en.wikipedia.org/wiki/Bidding_fee_auction
- StavrosK 10y agoThe "auction price" isn't actually a price. It's just the number of bids so far, and it's meaningless. They're just advertising it as a price to confuse and market. 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).
- thechao 10y agoDollar is the base name. Cent (idollar) is 1/100th of a dollar. Mill (idollar) is 1/1000th of a dollar. Values larger than a dollar are denominated by common name, e.g., 5 dollars, 10 dollars; the set of denominated bills is (usually): 5, 10, 20, 50, 100. 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.
- pimlottc 10y agoI don't think that's entirely true - the winner still pays the final price at the end of the auction, in addition to whatever they paid on their bids.
- philliphaydon 10y agoThere are also reverse Dutch auctions which you bid to drive the price down. The winner ends up paying the remaining cost of the item. You buy a bid for 50 cents and the bid drives down the price by 2 cents. If the remaining item is $15 for a $2000 item. You pay $15. It's all a scam tho imo.
- gedrap 10y agoIt's an interesting topic but I unexpected some analyses or conclusions at the end :( maybe the OP is going to release the raw data for the interested? Quite curious how would that turn out.
- tonteldoos 10y agoSadly I'm not the article author - I just submitted it to HN...
- dividuum 10y agoStory time: A couple of friends and me played on a competitive Minecraft server for a while. You could form factions, build protected bases and compete on various player vs player events. The last part didn't interest us at all, since we were all a bit older and went there to relax after work. So we did all kinds of other creative things like automated shops using redstone. The server also had an in-game currency which you could only obtain by mining. One day we got the idea to do a penny auction to finance the expansion of our protected area. So I quickly put together a Flask based site that parsed the Minecraft client chat log in realtime. Other players would send me in-game money which would result in a chat message my locally running python script would pick up. Everyone could then see the auction happening in realtime on the website (Example screenshot: http://i.imgur.com/yg2V3iS.png http://i.imgur.com/yg2V3iS.png). It was really successful, everyone had fun and hopefully learned that you should never bid on penny actions :-)
- air7 10y agoSimilarly, I once also looked into such a site, collecting data from on-going auctions. While the interface showed very little information about the bidders, the underlying JSON data carrying the real-time bids had addition fields such as user ID. I remember that while my user ID, along with other players that seemed human (i.e few and far between bids) had user ids that were 2000+, there were several users, that bid thousands of times, sometimes for 16 hours straight (there was no auto-bid option), all of which had a user ID of 1000-1010...
- jack9 10y agoPenny Auctions are notorious for running their own bots to compete and ultimately, act as financial loss prevention.
- thomasrossi 10y agoIn some country that kind of auction is considered gamble indeed and it's against the law (most EU as far as I know). From a Mechanism Design point of view, they are maximizing their own profit and they also expect their players to be not very rational entities and so they don't nee to use a truthful auction.
- jrs235 10y agoThe other hidden scam in this is that [some/many] these sites will give you X number of free credits when you first sign up. Not only is this to get you hooked and using the site but it cheats people who are already hooked and paid for their credits because it allows others to bid and "take away the winning bid(s) of actually paying customers) for free!
- legohead 10y agoI worked for one of the biggest penny auction sites. I'll address some things in this thread. 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).
- deleted 10y ago[deleted]
- ebbv 10y agoYou keep telling yourself that they are in any way ethical. They are not. 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.
- pkamb 10y ago> each bid adds ten seconds to the countdown which gives other bidders the time to counter your bid. Why has eBay never implemented this behavior?
- zaroth 10y agoI've always wondered this. I assume it's because it causes at least a 10x increase in server load by changing the bid and reload dynamics, and with so many auctions going on at once it would have a material effect on their systems. So instead you are supposed to use the 'reserve' feature and not DDoS them. 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/i1sfM8mxJpcg/v1/-1x-1.jpg https://assets.bwbx.io/images/users/iqjWHBFdfxIU/i1sfM8mxJpc...
- dragonwriter 10y ago> Why has eBay never implemented this behavior? 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.
- thescriptkiddie 10y agoBecause counter-bidding does not exist on eBay. 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.
- sailing 10y agoTheory 1: "Arsenic" spent $3500 to lose an auction for a $180 tablet. Theory 2: "Arsenic" laundered $3500. I'd wager a penny it's #2.
- daemin 10y agoFor that to be true, the Arsenic user would have to have some way of cashing out at least a large portion of that $3500. The only way that could happen is if they were actually on the payroll or otherwise being paid for goods/services from the auction company.