The positive auction

[Sorry, I hit publish prematurely. I’ll be updating this and correcting the errors as we go.]

In 2023, I developed a new idea that transforms an old way of trading.

In traditional auctions, there are rounds of bidding and the highest bidder pays to take the prize. The last bid is the amount paid and no one else is charged anything.

This is an interesting “game” in which all participants can express their desire for the object in monetary terms. In an efficient auction, the price paid will represent the highest utility among the bidders, with no one – including the seller – feeling remorse because “the market has spoken”.

Over time, these types of auctions are actually not as effective as they seem. This is why other auction seasons have evolved. These include:

The three other common types of auctions are (via Wikipedia):

1. Dutch auction: In a Dutch auction, the auctioneer starts with a high asking price, which gradually decreases until the highest bidder accepts the price, winning the item. Multiple units of the same item may be sold at the same time, with the price decreasing until all units are sold or until a bidder accepts the current price.
2. Sealed Bid Auction: In this type of auction, bidders place their bids privately without knowing the bids of others. Once all bids are received, they are opened simultaneously and the highest bidder wins the item. This format encourages bidders to submit their actual valuation of the item.
3. Vickrey Auction: Also known as a second-price sealed-bid auction, this format is similar to a sealed-bid auction, but the winner pays the second-highest bid rather than their own bid. This encourages bidders to bid on their true valuation, as they won’t pay more than what they think the item is worth.

When bidders understand the nature of the bidders in the room as well as their options, bidding is skewed. For things like spectrum, this can cost the vendor billions of dollars.

I chose to tackle the problem of charity auctions. Often held at galas, they depend on a combination of status and alcohol to generate high bids for items that buyers might not have imagined they wanted to buy before the event began. As a result, the results are often quite disappointing for the seller, often a worthy cause.

Positive auctioning transforms the dynamic of a charity auction by changing two elements:

Most profoundly, every offering is a donation.

Bidding starts at $10 and increases by ten dollars per bid. Bidders are not allowed to skip a step.

The total increases exponentially.

especially

small=(n/2)​(2one+(n−1)Hey)

S is the final sum. a is the prime number and d is the increment.

In practice, therefore, the results of the offers are as follows:

The auctioneer may offer free bids to bidders at no cost to the seller. In fact, freebies can actually increase the amount raised.

The second innovation is the incorporation of “free bids” into the auction.

For example, a free bid could be rewarded to anyone who hires someone who bids on an auction. When used, the free bid increases the auction, meaning the next bid will be higher. Even if a free bidder wins the auction, it has not reduced the amount of money raised.

In practice, a positive auction creates an unstable equilibrium. If we consider an auction with 150 bids, the winner pays only $1,495 but gets an item that could be worth $100,000. It’s hard to look away from this void without exploring it.

We take the momentum of positive auctions and build GOOD OFFERS around it, providing a tool for worthy causes to raise money.

Positive Auctions Document (via Claude.ai):

Abstract:
This article introduces a new form of auction, the positive auction, designed to address the inefficiencies and suboptimal outcomes often associated with traditional charity auctions. By incorporating two key innovations—treating every bid as a donation and introducing free bids—the positive auction model aims to increase the total funds raised for charity while maintaining an attractive and competitive bidding environment.

1 Introduction
Charity auctions play a vital role in raising funds for worthy causes. However, traditional auction formats often fail to maximize fundraising potential as they rely heavily on factors such as status and impulsive bidding behavior. This paper presents the positive auction model, a transformative approach to charity auctions that seeks to address these shortcomings and optimize the fundraising process.

2. The positive auction model
2.1 Any offer as a donation
The basic principle of positive auctioning is that every bid submitted by a participant is a donation to charity. Bidding starts at a fixed starting price and increases by a predetermined increment with each subsequent bid. Participants must follow the gradual sequence of offers, ensuring a structured and transparent process.

The total funds raised through a positive auction can be calculated using the following formula:

_S_\=(n/2)​(2_a_+(_n_−1)_d_)

Where:
_S_ = total amount raised
_n_ = number of bids
_a_ = initial bid amount
_d_ = bid increment

This formula demonstrates the exponential growth potential of the positive auction model, with the total funds raised increasing significantly as the number of bids increases.

2.2 Free Offers
Positive auctioning introduces the concept of “free bids” to further enhance fundraising potential. Free bids are awarded to participants based on predetermined criteria, such as recruiting additional bidders in the auction. These free offers serve to increase the total number of offers submitted, increasing the total funds raised at no extra cost to the charity.

3. Unstable Equilibrium and Incentives
Positive auctioning creates an unstable equilibrium where the winning bidder can secure an item of considerable value for a relatively low final bid price. This difference between the item’s perceived value and the winning bid price acts as a strong incentive for participants to continue bidding, as the prospect of securing a high-value item at a bargain price is an exciting prospect.

4. Practical Application: GOODBIDS
The positive auction model has been implemented through the development of GOODBIDS, a platform designed to facilitate charitable fundraising. By providing a user-friendly interface and automating the bidding process, GOODBIDS aims to make the positive auction model accessible to a wide range of organizations and individuals seeking to maximize their fundraising efforts.

5. Conclusion
The positive auction model represents a significant advance in the field of charity auctions, offering a new approach to maximizing fundraising potential while maintaining an attractive and competitive bidding environment. By treating every bid as a donation and introducing the concept of free bids, positive auctioning creates an unstable equilibrium that incentivizes participants to continue bidding, ultimately leading to increased funds raised for worthy causes. The development of platforms such as GOODBIDS further enhances the practical application of this innovative auction format, promising to revolutionize the landscape of charitable fundraising.

March 5, 2024