I found a custom fantasy league website that does allow for sealed bids, which is kind of neat. I say why not have it as an option for all leagues? Of course, it’s all a matter of preference, but I don’t think it would be that difficult for a site like ESPN to implement it as well. Their Live Auctions were a hit for me this year!

For the life of me, I can’t find the link right now (I was at the family’s house when I found it). But it’s nice to know that others have been thinking about this as well.

I think the ‘worth’ and ‘true value’ part is also confusing. I apologize for that and I guess I hadn’t read the edit carefully enough. That’s my fault. I’ll try to make clear the differences in bidding for first price vs. second price auction here.

In a first price auction, bidders still can try to anticipate what others are going to do. In this case, with uncertainty around the item up for bid, the fantasy owner does not always bid the price at which he/she thinks the player will be worth. Rather, there is ‘bid shading’ that takes place in order to try and get the player at a price lower than your valuation (getting him at your valuation gives you no surplus and risks the winners curese, especially with uncertainty). There is more anticipation of your counterparts here depending on the number of bidders and the supply of players, though all auctions theoretically become efficient due to the Revenue Equilibrium Theorem. In this auction, you want the highest bid, but not “too” high, or there isn’t return on investment.

The argument for the Second Price auction is that there is a dominant strategy. In the second price auction you always want to bid your valuation (in fantasy, we want everyone to bid what we think the player is worth). Because you pay the next highest bid (or some small increment above it, say $1), there is not reason to shade your bid. The only time you pay your valuation is if someone bid only $1 less than you. There is also no advantage to bidding higher than your valuation, as doing that would risk netting you the player at a price you don’t want him (or essentially a loss of surplus value). This makes the auction much more clear and requires more reliance on the valuation model each player has.

Brian – The language of the last paragraph threw me a bit. What’s the difference between “worth” and “true value”? If by “be worth” you mean “cost to win”, then I agree with you. Further, if you are proposing a sealed-bid system for drafting rosters then I LOVE that idea. Good thoughts here.

Here, the idea in the article is that by winning previously, you’ve already signaled to the rest of the league that you know what you’re doing. If they recognize this, and you reveal more information in the auction, they’re likely to follow suit through reevaluating their valuation. While it is a curse for the winner, it’s not necessarily the same as a “winner’s curse” in terms of auctions. When you win, people know who you are…and they’re out to get you. Just ask Phil Hellmuth!

With the English auction, you ultimately get lots of valuations right in line with each other due to the interdependent auction values. Bidders who originally thought a player was worth less now see other bids and decide their original valuation may have been incorrect. Hence the phenomena of interdependent values, which happens in collectible bidding.