The website www.bitcoinauction.us hosts a bidding game with a prize. Note that it's not a real auction because you don't get your bid back if you're outbid.
The game works as follows:
- The game starts with a specified prize, let's call it P
- A fixed closing time is specified
- "Bidding" starts at 0
- Players make "bids" to win. Each bid (let's call the most recent bid B) must be higher than the previous bid. Each bid also increases the prize amount P; let's assume P is increased by a fixed proportion (let's call it G for Generosity) of B each time a bid is made. So P would increase by G*B.
- Whoever has the highest bid when the game ends wins the prize P.
- It's complicated by the fact that "bids" are paid in bitoins and need to be confirmed prior to the auction finish. The amount of time to confirm a bitcoin transaction in this case is 10 mins on average, but follows a poisson distribution so could be an hour or more occasionally, and frequently is much less than 10 mins. This makes it a matter of luck if a "bid" is left to the last minutes of the auction.
- The game starts with a prize P=2, Bidding is at 0, Generosity (G) is 0.9
- Player A pays a "bid" of 0.5, which increases P by 0.45 (ie 0.9*0.5) to 2.45
- Player B pays a "bid" of 0.8, which increases P by 0.72 (ie 0.9*0.8) to 3.17
- Player A pays a "bid" of 1, which increases P by 0.9 (ie 0.9*1) to 3.35
- Player C pays a "bid" of 1.1 in the final 5 mins, but unfortunately for them it's not confirmed in time so it doesn't count. Player C gets their 1.1 bitcoins refunded when the confirmation comes through after the closing time, and player A wins the prize of 3.35 bitcoins.
What is an optimal strategy for playing the game, if any? Note that I do understand there's no guaranteed way to win every time, but perhaps there is a way to break even by adding another "bid" of a particular amount when you're outbid?
Disclaimer: I have no affiliation with the website, nor do I actually intend to play it.