Unique Bid Auction - Mechanism

Mechanism

This type of auction requires bidders to place bids that are global unique bids. That is, for a bid to be eligible to win no other bidder can have made a bid for the same amount. Bidders are generally able to place multiple bids and the number of current bids at each amount is typically kept secret.

There are two major variants of unique bid auctions:

• In a highest unique bid auction, the bid that is the highest and unmatched when the auction closes is the winning bid. A maximum bid value is usually set at a much lower level than the actual value of the lot.
• In a lowest unique bid auction, the bid that is the lowest and unmatched when the auction closes is the winning bid.

Unique bid auctions will typically allow bids to be very precise, in that each bid can be specific to the 'penny'.

For example, a unique bid auction might run as follows:

Value	Number of bids	Comment
$0.01	34
$0.02	9
$0.03	17
$0.04	57
$0.05	35
$0.06	1	Lowest unique bid
$0.07	17
$0.08	0
$0.09	1	Highest unique bid
$0.10	2

In a lowest unique bid auction, the bidder who submitted the single bid of $0.06 would win the auction, and would be eligible to purchase the product or service for $0.06, because their bid was the lowest unique bid. In a highest unique bid auction, the bidder who submitted a bid of $0.09 would win the auction.

In this type of auction the bids of other participants are necessarily secret, although some companies may provide broad guidance following a bid, such as whether the winning unique bid is higher or lower than one's last bid. In some instances the players may receive enough information for the game to be considered one of strategy. In other cases the guidance provided may be of little or no strategic value and the game may be considered one of chance.