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The World of Neopets

Virtual pets were ubiquitous in the childhood of the millenial. From Tamagotchi to club penguin, everyone has a favorite. One of many, Neopets.com allows its users to adopt “neopets” that generally look like mash-ups of animals and fairytale creatures. Weirdly, Neopets is a rather comprehensive creation for a digital pet website. Aside from the usual hidden quests and arcade games, Neopets has its own time zone, lore, and stock market. Users can earn the currency “neopoints” by playing games, earning prizes, or selling items. Though most purchases are made through individual user shops, a popular way to get rare items for cheap is the Neopian Auction House.

The Auction House runs pretty closely to the ascending bid auction discussed in class. The bids are public, people bid upward towards their value, and the highest bidder wins and gets the item. However, there are a few caveats. Neopet auctions only last for a certain time, so if you’re the highest bidder when the auction “closes,” you win the item, even if someone might have had a higher bid. The Auction House home page actually displays the first 20 auctions ending the soonest, which is ideal for users called “snipers” that place a bid right before an auction ends. Another condition is that item sellers can set a “minimum increment” for bids along with setting a starting price for their item. This means that a buyer’s bid must be at least the minimum increment greater than the last bid. We know that the dominant strategy in an ascending bid auction is to continue bidding until your value is reached, but with these changes the behavior of buyers and sellers adapts.

If a buyer wants a certain item, it is not as beneficial to continuously bid for an item as the auction is timed. If they bid multiple times below their value during the auction time frame, they could hike up the final price they pay if they win the auction. It makes more sense to wait for the final moments of an auction, and then place a bid. However, other buyers will likely do the same, which generally leads to no one bidding on an item until the very last minute. Now this ascending bid auction very nearly becomes a first price auction. There’s a one time chance to bid and other buyers bids might not appear until it’s too late. The dominant strategy for a first price auction is to bid less than your value to receive a positive payoff. However, it is impossible to know the actual number of bidders vying for the item, so calculating an optimal bid is difficult. When considering the price increment, a bidder will not enter the auction if the minimum increment increases the bid above their value, so a seller must choose their increment wisely.

Sellers can use price increments to their advantage fairly easily. If a seller wants an item to be sold at some price or greater they can set their starting price and increment so that starting price + minimum increment = desired sell price. So if you want to sell something for at least 5000 neopoints, you could start the price at 2000 and then give an increment of 3000. This is especially helpful if a neopoints user has an agreement to sell their item to another user. Auctions can be made private to just “neofriends” and the seller will fix their starting price and increment to equal the agreed-upon-value between the seller and buyer. The price increment pretty much guarantees that the seller will make some sort of payoff as long as there is a willing bidder. Because of this, neopets auctions are big money makers for rare items (the maximum starting price for an auction is 50 million neopoints.)

The Neopian Auction is not the only place for auction-style trading. The Trading Post also allows users to make offers on a seller’s item. But the trading post is markedly different from any of the auctions we learned about in class. An offer for an item can not only include neopoints, but can also include some of your own items. If a seller is selling multiple items, you can select all or some of those items to make an offer on. The user is not aware of any of the other offers. The inclusion of items in an offers an interesting twist to a neopoints-based auction. The seller could value the item in your offer differently than yourself. In the end, the seller wants to choose the offer that gives them the highest payoff on the item/items they have up for grabs. Their choice can become fairly subjective as items can be worth different values to different people. Neopets has ingeniously provided sellers a “wishlist.” Say a user wants to sell their Rainbow Abominable Snowball. They can denote in their wishlist what they might be willing to give up this item for. They can either put down a neopoint amount, or an item/items, or both. So if this user puts down Icy Negg on their wishlist, this gives some indication of what offers they might go for. Icy Neggs tend to be worth 20,000 neopoints on the market, so a buyer could offer that amount to create a viable offer in lieu of actual Icy Negg. This creates a scenario a little bit like a first price auction again as buyers don’t know the other offers. So you would want to make an offer still less than your value (this may be through a combination of neopoints and items) but it will have to be at least the market value of whatever is on their wishlist.

Neopets offers a way to study the principles of game theory in an strange, but easily observable setting. Although most of its users tend to be in the younger age range, dominant strategies still affect the way neopet owners interact with the site and each other. Sadly, Neopets is facing the end times. As newer generations tend to play games on downloaded apps, Neopets will likely stop growing in membership. Nevertheless, its active users are still making waves and creating fascinating interactions.

http://thedailyneopets.com/articles/auctions/

http://thedailyneopets.com/articles/trading-post-tips/

 

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