Here’s whatÂ user tracie_n_AnCapMan in our forum has to say:
Very Simple – Win it at all costs, any other strategy is mathematically unsound. Yes that is oversimplified, but You must be willing to lose big to guarantee the win. What causes the win? a few things, the aforementioned Volunteers Dilemma is a large cause against the average players who represent the vast majority of users.
at least one cooperates no one cooperates cooperate 0 0
defect 1 -10
as we can see from the above chart the person who is in the lead when the auction comes to a close causes a volunteers dilemma the remaining players must volunteer their bid to save the group. Oddly the winner of this dilemma is the one who does not bid because he saves a bid hence his 1, the person or persons that do bid to save the group gain nothing and the dilemma continues on the next round. If none of the remaining bidders cooperate via a voluntary bid to save the game, the remaining bidders in the volunteers dilemma (all players not in the lead) lose their entire investment the group loses. We have all seen this occur in these auctions when there are 3 – 5 players left with skin in the game. The person with the highest bid waits on the clock for the win, while the remaining 2-4 other bidders wait on each other to bid so that they can save their bid, remarkably most people choose to defect and this is why we see so many last second bids, and why the auction seems to end while everyone is watching.
Against better players the strategy (even if it is unknown by the players) is Hawk-Dove or Snowdrift Game theory. Like 2 cars racing towards each other the player to turn first will lose, the player who does not turn will win. In Penny Auctions when to auto bidding warriors play against each other the outcome has few possibilities one will pull out first, as his bids may take a LARGE hit against the other player. Two, neither player pulls out and both lose alot of money (both cars collide) Three One of the players pulls out late and loses a large amount while the other player loses a large amount (one car turns very late and still sideswipes the other car). In the end in both of these games the winner is the one who in the long run acts the most irrationally. I bet if you asked BidToWin he has over paid for items many times and in huge amounts. I would bet he has had occasion maybe only once so far (but it will happen again) of overpaying retail by over 1000$. He acts the most irrational and therefore will win the auction (which is the only way to make money). You can really see this Hawk Dove/Chicken Game play out when 2 professional type players go up against each other…. both lose one loses “less” by winning.
Swerve 0, 0 -1, +1
Straight +1, -1 -10, -10
the above is the math model with 1 being a win -1 being a mild loss and -10 being the ultimate loss of bankroll (this won’t happen in penny auctions as one player is sure to have more money than the other and therefore cannot bet til both players are bankrupt)
Nobel Prize Winner Dr. John Nash studied game theory heavily as it influences alot more than just games, his equilibrium theory is optimal, but only if all players in the game cooperate so equilibrium theory while assuring an even outcome is impossible even if not against the rules
When I played BlackJack for a living 5 years ago, there are many times you must act irrationally. Depending on the count you may hit, split, stand, or double on cards you would never do in basic strategy. Even in basic strategy we do things that are counter intuitive, we hit 16 vs 7 – A the odds of winning that hand are terrible, but we don’t do it to win more, we do it to lose less…
Another part of game theory to study in regards to penny auctions is the old prisoners dilemma. This will occur when 2 big players square off (which is rare). they each have 2 choices with different outcomes that effect them and the other player. If they choose to work in regards only to winning in the long run they will each experience a better outcome. If one chooses to act in interest of their freedom (bankroll) the other will usually not and our first player loses more in the long run, the only way to play this game is to play only to win without thought of cost.
Avoid the big players, unless you are vastly more wealthy
Note the beavior of the degenerates who by midsize buy ins to chase their losses and know that they are not a threat.
Never get into an auction you do not intend to win, It will destroy any psychological edge against the other players.
Always be the most irrational player
Never get stuck in a continuous volunteers dilemma determine at what point you will bet if no one else has and you won’t face the dilemma you will simply be bidding late on purpose and be the irrational one in the game of hawk – dove.
There’s been some lively discussion over on the forum regarding penny auction winning strategies, join in on the discussion.