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Unique bid auction

The meaning of «unique bid auction»

A unique bid auction is a type of strategy game related to traditional auctions where the winner is usually the individual with the lowest unique bid, although less commonly the auction rules may specify that the highest unique bid is the winner. Unique bid auctions are often used as a form of competition and strategy game where bidders pay a fee to make a bid, or may have to pay a subscription fee in order to be able to participate.

In practice, such auctions function like lotteries, but the small amount of "skill" involved makes them legal in jurisdictions where lotteries are otherwise illegal.[1]

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:

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:

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.

Although items worth thousands of dollars can, under some circumstances, be won by very low bids of far less than their value, the auction organizer typically charges a participation fee, which in an auction with a sufficiently large number of bidders will exceed the value of the item being sold, allowing the auction organizer to make a profit.

Because such auctions typically require very large numbers of bidders to be profitable, virtually all instances of unique bid auctions are heavily dependent on the use of technology, in that they are either run solely using mobile technology (e.g. bidders submit their bids via reverse charge text messages) or they are on-line auction sites, or both.

The legality of unique bid auctions depends on a combination of governing gambling laws and the design of the specific auction model. If an investigating authority were to determine that randomness or chance plays too large a role in the outcome, the auction may be considered a type of lottery. If, on the other hand, the investigating authority found strategy and skill played a sufficient enough role in the outcome, they may find the auction to be legal. Worldwide, there are no reported cases or statutes specifically outlawing the lowest-unique bid auction model.

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