A Dutch flower auc­tion runs (roughly) like this: The price for a lot starts at a high num­ber. At the begin­ning of the auc­tion, a large clock on the wall begins count­ing down — quickly — from the high price to lower and lower prices. The first bid­der to stop the clock agrees to pay the currently-​​shown price for the lot.

There are some details I’ve elided, like the fact that there are often mul­ti­ple items in a lot and thus bids are being made on por­tions, but let’s ignore that.

I’ve been look­ing for soft­ware to sell things on my web­sites using this sort of for­mat: I’d start a book, for exam­ple, at $50, and then every day the price would decre­ment by $1. Who­ever sent an email, or maybe sent money via Pay­Pal, would get the thing. Sim­ple, effi­cient, and nice.

So far, I can’t find any. The only stuff I can find is “reverse” auc­tion mod­ules for PHPAuc­tion and the like, which are not the same as Dutch flower-​​style auc­tions. And of course eBay has rede­fined the “Dutch” auc­tion to suit their own metaphor, a very dif­fer­ent ani­mal indeed.

Well, any­way, you know me by now. I had to break the assump­tions of the ele­gant, supremely effi­cient mar­ket­place a Dutch flower-​​style auc­tion pro­vides. Me, I can’t leave well enough alone.

Thus: the Drunkard’s auction.

• Before the begin­ning of the sale, the Seller of a Lot spec­i­fies a min­i­mum price he is will­ing to accept for the Lot, a max­i­mum price that seems rea­son­able, and a start­ing price.
• The Lot is offered openly on the mar­ket at the start­ing price.
• Peri­od­i­cally, the price of the Lot changes ran­domly, ris­ing or falling by a fixed (mul­ti­plica­tive) fac­tor, but bounded on the bot­tom by the min­i­mum price and bounded on the top by the max­i­mum price.
• Buy­ers may pur­chase the Lot at any time: first-​​come, first-​​served.

Sup­pose the mul­ti­plica­tive fac­tor is 9%. So if we start a lot at $77 with a floor of $30 and a ceil­ing of $120, then the asked price in the first period will be $77, in the sec­ond period it may be $70.07 or $83.93, in the third period it will be one of {$63.76, $76.38 (twice as often), $91.48}, and so forth.

Not as effi­cient as the decre­ment­ing Dutch flower-​​style auc­tion, is it? Dis­cuss, if it seems wor­thy of dis­cus­sion: strate­gies for buyer and seller (if any), how it might func­tion in mar­kets such as blogs in which cus­tomers are not sit­ting there anx­iously star­ing at clocks on the wall with their fin­gers poised over but­tons, and whether there might be more rea­son­able meth­ods of walk­ing (such as addi­tive incre­ments, or weighted prob­a­bil­i­ties of up– and down-​​ticks depend­ing on where in the price range the cur­rent price sits.

[Frankly, I lied when I said I was just sug­gest­ing this to break the assump­tions and see what hap­pens — I think this is an improve­ment over the decre­mented ver­sion exactly because of the asyn­chro­nous and low-​​volume mar­ket online sales expe­ri­ence. Plus it would appeal to mar­ket timers, who I sus­pect tend to buy more.)

I’m curi­ous to know whether there are snip­ing strate­gies in this or the Dutch flower-​​style sale, and whether these might be off­set by mak­ing the length of each period an i.i.d. ran­dom vari­able as well.

It also strikes me as some­thing a cron job and a Pay­Pal store­front might man­age to run hand­ily. Off to check that.…