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Illegal Auctions of Stolen NSA Information

As I’m sure you know, the NSA among the most powerful hacking organizations in the world, with unfathomable amounts of information. Some of the most sensitive security data and surveillance is gathered daily by the NSA. If some of this information got into the wrong hands, it could be catastrophic for the United States or even the planet as a whole. This summer, an anonymous group called Shadow Brokers breached the computer system of a part of the NSA and stole classified files. They decided to auction the stolen information in a very strange format that we have not been exposed to in class. Bidders must send bitcoins as bids to Shadow Brokers without any hope of getting it back. That means you send your bid and only get any kind of payoff if you are the winner.

Evaluating this form of an auction is much less straight forward than in class. We know that each bidder must have a true value on the information, but regardless of winning or losing, they will have to pay the amount they bid. Consistent with class, none of the bidders know the values of others. By bidding, they could potentially just be throwing away their money. Bidding their true value could not be the dominant strategy because you are expecting to lose, in which case you lose your bid. Bidding less than their true value is also not the approach because then they are more likely to get nothing. Overall, I think this bidding strategy cannot be analyzed as we have done in class because the bidders lose their money either way.


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October 2016