Skip to main content

App to Run Auctions at Sports Arenas

Dropit, a startup company from New Zealand, has created an app that allows sports spectators to participate in 60-second auctions. Spectators can download the app to participate in auctions in various arenas by watching the scoreboard. When the auction starts, the price of the item drops, and the first person to “swipe up” on their phone wins the item for the price on the scoreboard. The goal of the app is to advertise in a way that would be more interesting and memorable to spectators. Sponsors would most likely be selling their items at a lost, but they are more concerned with getting their name out there than making a profit off of this one item. In addition, advertisers can give all auction participants a coupon as a participation gift, which would be another way to make the advertisement more memorable. The app has been used in hundreds of trial auctions in New Zealand and is starting to be used in sports arenas in the United States.

The Dropit app uses a descending bid auction. We learned that a descending bid auction is equivalent to a first price auction. In both situations, the dominant strategy would be to bid less than your true value. However, by the nature of the auction, a descending bid auction would help sponsors lose less money on their items. Participants using the Dropit app have little time to think about their true value of the item. As participants see the price dropping, they feel pressure to bid before someone else takes the item. It is likely that someone would end up caving to the pressure and bidding with little regard to their true value. With a first price auction, participants would have to declare their bid, so they would have to think more carefully about their true value to come up with a number to bid. It is more likely that someone would bid a higher number by caving to the pressure of the descending bid auction than declaring a value for the first price auction. Hence, even though the auction types should be equivalent, having the Dropit app use descending bid auctions is more beneficial for sponsors.



Leave a Reply

Blogging Calendar

October 2017