Eno Auctions definitely did not invent the penny auction. We just refined it. The real story is as follows.
The concept of a penny auction was first introduced in 1971 by Martin Shubik, the Seymour Professor of Mathematical Institutional Economics at Yale University, under the name of dollar auction. The game is an illustration of a paradox in which the participants are constrained to make in the end an irrational decision based on a sequence of rational decisions; an irrational escalation of commitment.
Rules: Bidding starts at $0.01 and goes up in $0.01 increments. The winner pays the auctioneer whatever the high bid is to get the dollar. The 2nd highest bidder also must pay the amount of his bid without getting something in return. Typically , the auction will start with a few bidders hoping to make profit and end up in two or more bidders stuck in a war of attrition. In most cases the bid will reach $1 and then a problem will become evident for the $0.99 bidder, He can no longer make profit but right now the only rational option is to bid $1.01 which will result in a $0.01 loss compared to $0.99.
Martin’s auction game was transformed in a penny auction site in 2005 by Telebid. It was very controversial in the beginning and was heavily criticized. That led to a business change model adopted by all reputable penny auction sites. Visit us at Eno Auctions today and see if we have any products that get your heart beating faster. We specialize in tech products and gift cards.