The Tournament Auction:

How It Works

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The Tournament Auction vs. Traditional Office Pools


In addition to having several advantages for participants, the tournament auction is also easier to set up and administrate than the traditional office pool. Here’s how it’s done:


Step 1: Decide on Payoffs

The first step is to determine how the money that is bid will be redistributed to the winners. You can award money for advancing to any round of the tournament (though I have yet to find a satisfactory payoff system that rewards teams for winning just one game), and you can split up the payoffs however you like. Here are a few options for setting up a payoff system. The numbers in the table represent the percentage of the pool that is awarded to a team that finishes in each round (i.e. 8 teams will reach the Sweet 16 and not advance any further, 4 teams will reach only the Final 8, etc.).



“Front Loaded”

“Gradual Increase”    



“Back Loaded”

Sweet 16






Final 8






Final 4






Final 2













Remember that how you allocate payoffs can greatly affect the type of bidding you get.


Step 2: Create Bid Sheets

Next, set up some sort of mechanism for recording bids. Pen and paper will work, but a spreadsheet that can be edited by all participants is ideal. I use Google Docs because it allows all participants to edit the spreadsheet simultaneously from remote locations. Whatever the format, you should begin by breaking out the teams onto bid sheets. I have always organized the bid sheets by seed: the first sheet is for #1 and #2 seeds, the second sheet is for #3 and #4 seeds, and so on. If you are working on a spreadsheet, this means that each sheet clearly shows eight teams as well as all of the bids that have been placed for those teams.


[These are actual bids from my 2007 auction, though the names have been changed.]


Setting the bid increments is an area with some latitude, and a lot will depend on the group that you are aiming at. Setting a bid increment that is too high will discourage participation on the part of some players, while setting unnecessarily low bid increments will make the bidding process a little sluggish. It is a good idea to create a gradation in the bid increments to reflect the interest that the various seeds will receive. The one that I have settled on is $0.50 for seeds 1 and 2, $0.25 for seeds 3 through 6, $0.10 for seeds 7 through 12, and $0.05 for seeds 13 through 16, which works for my less-than-high-stakes group.


For each team, there is one column for the bid amount and one column for the bidder’s name, each to be inputted by the bidder.


Step 3: Create a Summary Sheet



The summary sheet provides an at-a-glance look at each team, its owner, and the top bid amount. It also shows the reward for reaching each round of the tournament. The summary sheet is linked to each of the bid sheets, so it should not be written in. To pull the owners and maximum bids I use the “MAX” and “VLOOKUP” functions, burying them down in the bid sheets and linking to them for the summary sheet.


Step 4: Start the Bidding

After spreading the word about the auction, I generally select a few of the more involved players and encourage them to place starting bids on some of the higher seeds, getting some money in the pool and creating an incentive for the less motivated players. (When you have $10.00 in the pool, the payoffs just aren’t enticing enough to encourage new people to join.) You can also have a minimum opening bid for each team.


Bidding concludes at some predetermined time, generally the Wednesday before or early on the first Thursday of the tournament. I would suggest having the bidding conclude the Wednesday night preceding the tournament—last year we ended on Thursday morning and had several players lose teams because they were in a meeting. With an online auction, the final hour of bidding can get remarkably exciting, with teams changing hands every few seconds. In this sense the tournament far outshines the tournament pool: in both contests there is an opportunity for community building as the tournament is going on, but only the tournament auction is interactive before the tournament even starts.


Potential Pitfalls: Sniping and Settling Up

It should be remembered that some players will attempt to game the system by placing bids as late as possible, decreasing the chances that another player will have time to place a higher bid. Sniping can be a problem with this format, but there are a few ways to lessen the effects of snipers.


The first way to combat snipers is to create a rule that players must place a certain number of bids in the initial days of bidding in order to be eligible for the final day. This encourages all players to get their bids in early, and it also spreads out the bidding budget so that the final few moments are not quite so frantic.


The second way is to create some uncertainty regarding the end of the bidding. For instance, rather than ending the bidding at 10:00 p.m. on Wednesday night, you can create a possible window of end times (say, 9:00 to 10:00), and randomly generate an end time within that window, allowing someone uninvolved with the auction to call an end to the bidding. This way, all bidders must get their best bids in early.


While the tournament pool collects and distributes money in tidy increments of $5, the tournament auction is a little more messy. For instance, in the example above, players whose teams ended up in the Sweet 16 earned $2.66 (less the amount of their bid), and paying odd amounts to ten or more participants is no fun. To take some of the sting out of the payment process, it usually helps to take no money up front and just pay (or collect) net amounts at the end of the tournament.


Short Selling

Short selling is theoretically possible in the tournament auction format and would actually be a way to allow multiple participants to own the same team. For instance, let’s say two players desperately want to own North Carolina, and they have bid $5.00 and $5.50, respectively, on the Heels. They would both be allowed to own it at $5.00 (the value of the second-highest bid) as long as they could find someone to short it for $5.00. The short seller would receive a $5.00 credit on his account, and he would then owe money depending on how far North Carolina progressed. If UNC loses in the first round, he’s ahead five bucks, and if they win the title, then he owes the championship amount minus five bucks. The two “long” owners of UNC would be paid from the prize pool just as any other team would be.


Spread the Word!

The tournament auction has numerous more possibilities to make it an even more fun and rewarding experience. If you are interested in bringing an end to our current one-march-madness-gambling-format system, then spread the word and try out the tournament auction on your own.



© 2008 Daniel Lauve