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Making Auctions Work

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Rick-Holzgrafe
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I've been working on a design recently that involves an auction. I ripped out some preliminary rules and then sat down to think through a first turn, and realized that the auction wouldn't work at all. After more thought, I think I've come up with a set of requirements for designing effective auctions. I'd welcome any feedback and discussion.

1. Players must value the auctioned items differently.

If the item being auctioned has the same value to all players, there is no point in holding the auction; you might as well just set a fixed price. The auction will be won by the first player who bids the actual value of the item.

Of course it's not as simple as that. Simply having different amounts of cash will cause players to value things differently: a player with $10 will bid $2 much more readily than a player with only $3. But there will be times (for example at the start of the game) when most or all players have similar amounts of cash.

An example: in Power Grid, players bid for power plants that produce different amounts of power when provided with different kinds and amounts of fuel. Because fuel prices and availability vary, and because the need to purchase power plants varies with the current extent of a player's network, each player is likely to have a different opinion of the value of any given power plant.

2. Players should occasionally value the auctioned items similarly.

This makes for tense, high-bid auctions. If the players always differ greatly in their valuations, then the winning bidder will never reach his own pain point: he will always win with his first bid above everybody else's pain point. There's no decision agony in that, and you want some occasional decision agony and some eyes locked across the table.

This principle doesn't really conflict with #1. Bidding between players with similar valuations is tense only if it isn't the norm. You get tense only if you don't know how bad the other guy wants to win the auction.

3. The ultimate value of the auctioned item must be uncertain.

Decisions are agonizing only when you're not sure they're correct. The need to purchase (or forgo) an item now that might be valuable later is another source of tension in the game.

This principle applies to all decisions in games: choice of strategies, for example. You make decisions and just hope they will prove effective. But I think the principle is especially strong in an auction, where the cost can keep rising. It forces you to repeatedly re-evaluate the auctioned item, in a rapid-fire cycle, in light of your opponent's revealed desire for it.

4. Bid increments should be chunky.

If the bidding starts at $10, and each successive bid goes up by one cent... then either the bidding will take all day (and be incredibly dull) or there will be no point to the auction because the difference between the lowest and highest bids will be trivial.

In many games, there is no rule about minimum bid increments and none is needed. This is because the smallest unit of money is chunky enough. Princes of Florence is an example: the minimum unit is 100 Florins (or Guilders or whatever they are), the starting bid is always 200 Florins; typical winning bids range from 200 to 1200 or so. It works just fine. But the game I'm designing may end up with a small money unit in comparison to the typical winning bid, so I may need a minimum-increment rule.

This principle applies only to open auctions, where the players bid in succession and know what their opponents have bid. I think it also doesn't apply when the auction is a single-bid system, where each player gets only one bid. In that case a player will balance his bid somewhere below his pain point and above the other players' pain points (or what he hopes their pain points are), and hope for the best.

*****

That's what I think I've figured out so far. What do y'all think?

FastLearner
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Making Auctions Work

Good list. While it's implied in your first three, I think a baseline need is:

0. Players must be able to have some understanding of how valuable the item is, both to them and to other players.

In order to meaningfully participate in an auction it's essential that a player be able to know whether it's something he wants, and at least roughly how badly he might want it. Similarly, though it need not be nearly as precise, he needs to know how much other bidders might want it, or at least why. If you have no sense of whether other bidders are just driving the price up or if there's some chance they actually want it then your decision to raise your bid becomes pretty random.

-- Matthew

Rick-Holzgrafe
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Making Auctions Work

FastLearner wrote:
0. Players must be able to have some understanding of how valuable the item is, both to them and to other players.

I think some uncertainty is also required, as described in Point 3. And in an open round-robin auction, you can watch your opponents sweat in an attempt to divine their intent. This kind of player interaction is my favorite part about auctions.

But yes, some understanding is needed. Knizia's Ra is driven by exactly that: nothing's hidden except the players' current scores, and the fun is in figuring out how badly your opponents might want the current batch of tiles, and invoking Ra to start an auction at a time when they'll feel forced to bid on a marginal batch.

FastLearner
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Making Auctions Work

Rick-Holzgrafe wrote:
FastLearner wrote:
0. Players must be able to have some understanding of how valuable the item is, both to them and to other players.

I think some uncertainty is also required, as described in Point 3. And in an open round-robin auction, you can watch your opponents sweat in an attempt to divine their intent. This kind of player interaction is my favorite part about auctions.
Absolutely, and mine, too. That's why I wrote "some understanding." If you know precisely what it's worth then the auction breaks down.

Quote:
But yes, some understanding is needed. Knizia's Ra is driven by exactly that: nothing's hidden except the players' current scores, and the fun is in figuring out how badly your opponents might want the current batch of tiles, and invoking Ra to start an auction at a time when they'll feel forced to bid on a marginal batch.

Indeed, and delicious. I think we're perfectly in synch, I just wanted to point out the base assumption because I've played some prototypes (and even a few published games) where I had no clue how to value the item up for auction and it just completely broke down.

Rick-Holzgrafe
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Making Auctions Work

FastLearner wrote:
I think we're perfectly in synch, I just wanted to point out the base assumption because I've played some prototypes (and even a few published games) where I had no clue how to value the item up for auction and it just completely broke down.

Yep. Over at BGG I posted a Railroad Tycoon Strategy Guide for Beginners. RRT is a great example: the first thing you do in each game is bid to be the starting player, and newbies of course haven't a clue what that's worth. And it may be the single most important part of the game! Without that auction RRT would be terribly unbalanced, because the value of going first varies from important to hugely important. Whoever wins that auction must be made to pay for it, or he will steamroller everybody else from that point forward. Fortunately it is possible to evaluate fairly well once you're familiar with the game, and then it's a matter of Auction Principle #3: not being certain what it's worth, and having to take a chance.

clearclaw
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Making Auctions Work

Rick-Holzgrafe wrote:
But yes, some understanding is needed. Knizia's Ra is driven by exactly that: nothing's hidden except the players' current scores, and the fun is in figuring out how badly your opponents might want the current batch of tiles, and invoking Ra to start an auction at a time when they'll feel forced to bid on a marginal batch.

Caveat: Scores in Ra are perfectly trackable. As a result I rarely see it played with hidden scoring.

The uncertainty in Ra comes in the form of push-your-luck and player prediction. You know exactly what tiles each player has, their relative scoring positions, and the suns they have left etc. What you don't know is what tiles will be drawn in future auctions in the epoch, and how quickly the Ra tiles willc ome out.

clearclaw
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Making Auctions Work

There are several values in auctions which seem to be overlooked:

1) Opportunity cost of participating. The classic example is a dollar auction where everyone but the winner is screwed (or at least second place ala Age of Steam).

2) Opportunity cost of winning. The classic example is dutch auctions ala Merchant of Amsterdam. The auction form attempts to force players to bid E(v), which is of course a losing strategy given that other players will manage to achieve under E(v).

3) Collateral damage. For instance this could encompass manipulation of bid values so as to exclude or eliminate other bidders from contention either in the auction or other portions of the game. Industria and Power Grid are classic examples here. A dollar short!

4) Use of auctions as a means of seducing players into sub-optimal strategies. Intrige and perhaps So Long Sucker along with most other collusion/collboration games are perhaps the classics here.

None of these things are inherently critical, but I'd find it hard to consider an auction which didn't have at least two of them to be interesting.

lordpog
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Making Auctions Work

Quote:
1. Players must value the auctioned items differently.

If the item being auctioned has the same value to all players, there is no point in holding the auction; you might as well just set a fixed price. The auction will be won by the first player who bids the actual value of the item.

Last week I played a 3 player game of power grid. In the las turn it was neck and neck between all three of us. Dave was sorted with his plants. However, Barry and I both needed number 38 (3 garbage), which powers 7 cities, the next best only powering 5 not being nearly as attractive. In a fierce auction, the price climbed steadily to 82, where think it was getting ridiculous, I folded. Barry paid the 82, and had to spend over 20 on fuel.

I settled for no.35, which powers 5 on one oil, at face value, and had enough money left over to win on the tie break at 17 cities. We both overvalued no.38, because if I had got it for 81, I would have been in Barry's shoes, and he in mine.

What was my point? Oh yeah, the 38 was just as valuable to each of us on the last turn, but I would not want to set a fixed value, because as you note
each player is likely to have a different opinion of the value of any given power plant.

Quote:

Rick-Holzgrafe
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Making Auctions Work

lordpog wrote:
the 38 was just as valuable to each of us on the last turn, but I would not want to set a fixed value, because as you note
each player is likely to have a different opinion of the value of any given power plant.

This is what I meant in #2: Players should occasionally value the auctioned items similarly. The word "occasionally" is what makes it work. If everybody always valued plant 38 the same, there'd be no point to the auction. You'd know exactly how much every player was willing to pay, so the first bidder would bid that much immediately, and win the auction with no tension.

In your game, you really didn't know that that was true, and the bidding lasted awhile and went sky-high because of it. A perfect example of points #1 and #2 making a great auction experience.

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