To Auction or Not to Auction
Monopoly has been a common household board game since its origin in 1903. Despite its status as a family-oriented game, however, many of its rules and strategies model more complex aspects of economics. One such aspect of the game, the auction, recently went viral as a rule regarding auctions became more widely known to the average player. This rule–which dictates that unowned property is put up for bidding whenever a player lands on it and does not wish to buy it–though fascinating to the general public, was already commonly known to more serious Monopoly players. These serious players, as Jim Pagels argues in his article “Actually, This Is How You Play Monopoly”, actually rarely have use for such a rule. In fact, the true strategy to playing Monopoly well would be to avoid auctioning unowned property. This makes sense; according to what was discussed in lecture, the auctioning featured in Monopoly would proceed like an ascending bid, where the price starts out low and gradually increases. The Banker (who serves as the auctioneer) also sells the property in question to the highest bidder’s price. As a result, a player could easily end up paying a higher price than the one he or she originally declined to pay. Furthermore, as Pagels mentions, “every property is actually severely undervalued”; in other words, the initial price of an unowned property is “far below its [actual] market value”. Additionally, there is no dominant strategy for the kind of auction featured in the game. The dominant strategy for an ascending bid is for a player to stay in the auction until his or her threshold price is reached. However, this cannot be applied to Monopoly because if the bidding price exceeds the player’s threshold price, and he or she drops out of the auction, then that same player could potentially lose even more from losing the unowned property to another player.
The concept of auctioning being virtually useless in Monopoly is an interesting one because it was discussed in lecture that the advantage of having a dominant strategy is that, by definition, it does not matter what the other players do; the payoff is still significant. However, in the case of Monopoly, there is no dominant strategy when it comes to auctioning, so any analysis of the situation is useful only if the other players are not as aware as you are of these bidding concepts. Otherwise, you no longer gain any advantage in deciding to auction off unowned property, though it would make for a relatively interesting game due to it being more psychological between the players.
http://www.slate.com/blogs/browbeat/2013/06/03/monopoly_auction_rule_official_yes_smart_no.html