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The Tournament Auction:

A Brief History






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Introduction

The Tournament Auction vs. Traditional Pools

How It Works

 

In 2005, I was traveling in India with my business school class. It was early March, and several of us were looking for a way to have a basketball pool even without consistent access to the internet. Without a way to print out brackets, conduct research, or follow the action, it was looking like we would be unable to have a traditional pool. The day before the tournament began, a classmate told me of an auction format that had been tried at her former employer. All she remembered was that they auctioned the teams off, so I spent the rest of the day conceptualizing a scoring system and a pencil-and-paper format that would allow us to conduct the auction the following morning, on a bus headed to the Taj Mahal.

 

That evening, I sat down and created some bidding sheets, with the following introduction:

 

Bid on as many teams as you want, and win money based on their progress through the tournament. Payouts will be based on a percentage of the total pool and will be determined as follows:

 

2% of the pool for making the Sweet Sixteen (winning two games)

An additional 3% for making the final eight

An additional 5% for making the Final Four

An additional 7% for making the championship game

An additional 10% for winning the championship

 

So, picking a team that wins the championship will be worth 27% of the pool.

 

To bid, cross out the previous bid and write down your bid along with your name. Pay attention to the bid increments for the different seeds.




 

On the pages that followed, I listed the teams in order, starting with the 1 seeds and ending up with the 16 seeds. The 1 and 2 seeds had bid increments of $1, seeds 3 through 6 had $0.50 bid increments, and everything else had increments of a nickel.

 

The next morning, on the way to the Taj Mahal, the silent auction made several trips around the bus, and eventually every team had chosen, even if there wasn’t too much demand for the lower seeds. The high seeds attracted between 3 and 8 bids, ending up in the $3-$6 range, and the overall pool wound up being $86. Nineteen people in all placed bids, which in retrospect may be more of a testament to the dreariness of the Indian countryside than to the excitement of the fledgling tournament auction.

 

The next year, I conducted the auction at my office. I held the auction open for the three days before the start of the tournament, and all of that time was needed, as approaching people individually in their cubes required much more of a hard sell than passing the bid sheets around a bus full of classmates. This time, I altered the payoffs slightly, giving (incrementally) 3% to the Sweet 16 and final eight and 4% to the final three rounds. So the national champion was worth only 18%, but the lower seeds generated much more interest than they had the year before.

 

For the 2006 auction, 15 people placed bids, 12 won at least one team, and, though the total pool was a relatively paltry $62.80, it was remarkably well distributed among the bidders. Of the twelve “owners”, six ended up in the red and six in the black, and eleven had a team make it to the Sweet 16. Amazingly, the final eight teams had eight different owners. Thanks to losses by favorites such as UNC, Kansas, and Ohio St., playing the frontrunner strategy did not entirely pay off, which allowed many of the more frugal participants to reap a decent reward. I made $6.28 off a $0.10 investment in George Mason, the unlikely 11 seed that made it all the way to the Final Four.




 

The next year’s auction was the one that convinced of the potential of the auction format. I knew that I needed to get away from paper bid sheets—the final day of year two had been a nightmare as I was taking calls every five minutes from people asking where they stood on their favorite teams. On the good advice of a former classmate, I created a Google spreadsheet that could easily be edited by anyone. Separate spreadsheets recorded the bids on individual teams, and a summary spreadsheet kept track of each team, its owner, the price, and the overall pot and payouts.

 

Whereas the first two auctions had been a nice diversion, the third one was an event. I decided to have the bidding end at 11:00 central time on Thursday, just before the first game tipped off. Up until Thursday morning, bidding was steady, but once the end was in sight, the bidders started a feeding frenzy that had teams switching hands every few seconds. As I prepared to cut off the bidding, I was amazed at the changes on the board, which fluctuated like a stock ticker. In the end, $88.65 was contributed to the pool by fourteen participants. The frantic bidding was in stark contrast to the 2007 NCAA Tournament, which was the most staid in recent memory. As a result, only the people who put in for the favorites made any money.

 

After three years of the tournament auction, I’m convinced that it has a place among the office hysteria that is March Madness. In many ways, the auction is superior to traditional brackets, and the two actually work quite well together. Flexible and fun, it is intriguing and unpredictable in a way that mirrors March Madness itself.




 

 

© 2008 Daniel Lauve