Blind Auctions Are A Catch-Up Mechanism

In auction games, the rich tend to get richer. If one player has a lot of money (which I am using here to refer to the resource used to bid), they exert a tremendous amount of threat through a dilemma:

• If other players bid low to preserve their resources, the rich player gets things cheaply and remains wealthy.
• If other players bid high to bleed the rich player of money, they run out of money and allow the rich player to subsequently snap everything up extremely cheaply.

Much like the real world, wealth imbalances in games tend to grow, especially when players can use auctioned items to compound their wealth further. One solution is to use blind auctions, which bleed away wealthy players' resources because they don't know what their opponents are bidding.

To understand why this works, we need to consider the diminishing marginal utility of money. To a player with very little money, each additional unit is valuable because it significantly changes their buying power. To a player with a lot of money, especially more than any other player, each additional unit is worth much less because it does not change their options; they are already wealthier than everyone else, so they care more about what the money buys, not more money.

However, that does not mean a rich player will waste money. Players dislike wasting resources, so the rich player will pay as little as needed to get the auctioned items they want. They may even bow out if they think an opponent is overpaying, knowing it will make it easier to win other items. But in a blind bid, they don't know what opponents are bidding. This is where the diminishing marginal utility of money comes in: $5 to the rich player is less valuable than $5 to the poor player, even if they value the auctioned item the same. Without knowing how much the poor player is paying, the rich one will bid higher to guarantee victory.

This is especially true when the rich player's wealth is several times that of the next wealthiest player. If I have $10 and everyone else has $3, I know I can get an item I want by paying $3. In normal bidding, others might not bid all $3 because it leaves them helpless for the next bid, letting me get it for less than $3. But because of uncertainty, I will overpay to guarantee I get it.

A Game of Thrones: The Board Game is an interesting case study because its auction to fight against the wildling threat is blind in two different ways: you do not know what other players are bidding, and you don't even know what the rewards are that you are bidding on (or the punishments if you fail to bid enough to drive the wildlings away). This means you don't even have the luxury to evaluate whether the reward is useful to you, meaning you are not just bidding against the hypothetical highest opposing bid but also against the best hypothetical reward that an opponent might claim instead of you.

Rich players have an easy time bullying their opponents with their wealth in auction games due to the implicit threat that so much liquidity poses. By depriving the wealthy player of information, you force them to bid against the worst-case hypothetical instead of the cautious hopelessness of their actual opponents.