http://wow-en.curse-gaming.com/wiki/a-guide-to-dkprpp-explanation-examples-and-summary/

This page is part of a wiki on Curse Gaming, a popular site dedicated to World of Warcraft and other MMOs. It describes market systems for distribution of items in such games when there is competition among many players. When a group of players assemble on a repeated basis to defeat raiding (end-game) content, they want to create a market that allows fair distribution of the limited number of desirable items which will result from killing bosses in the raid dungeon. One way to do this is to assign points to raid members for attendance, then let them spend the points on items as they drop. As the site describes, this can be done via a fixed-point system, where each item is assigned a value which is deducted from the player’s total point value, or an auction. To use terminology used in lecture, two popular systems are an ascending bid auction and a first price sealed bid auction.

Most players decide when an item drops how they value it - this decision is based on the number of points the player currently has (Is the item valuable enough for the player to “blow” all his/her points on if he or she is bid up to their maximum points?), the level of upgrade of the item (How much more powerful will this item make his/her character?), etc.

In a first price sealed bid auction, players communicate their bid to a guild officer or raid leader via a private in-game message, and the item is awarded to the highest bidder. Choosing a valuation for the item in this case requires a player to consider what one’s competition is (If a hunter item drops and there are 3 hunters on the raid, one might bid lower than if there are 5 hunters along that day) as well as a personal value on the item in terms of level of upgrade.

Until very recently, I was a member of a high-end raiding guild in World of Warcraft that used a DKP system with ascending bid auctions. My boyfriend or I ran anywhere from 5-15 auctions on a raid night, announcing in a common chat channel that bidding was open for a specific item, then monitoring the numbers that players typed into the channel until all but one player had dropped out. We then formally announced the winner and the player could loot the item from the boss. We noticed that the valuations of items changed over time - a first kill of a boss with coveted loot could yield prices of upwards of 100 points, while a boss who had been killed many times would drop loot that would go for 10 points or less. (Our guild set 3 points, what one would earn for about half a full raid night, as a minimum bid or “reserve” price. Some systems have a different reserve for different items depending upon their perceived value.) Inflation in the system also affects the price of loot - we had some players for whom the items that were dropping were not upgrades, so they would end up accumulating points and easily outbid other players for coveted items later. (While some players never seemed to have more than 20 or so points, I ended up with a pile of 200+ points quite by accident, and was #2 on the dkp list when I left the guild last week.)

One difference in an ascending bid auction is being able to see who else is bidding and what they are bidding, so fierce competitions can arise. A player’s valuation of the item may change when they see that a particular player or member of a class is bidding - they may choose to “pass” to a friend, or bid higher to beat someone they do not think deserves the item as much as they do. It is likely that players do drop out when the price reaches their value, if they decided on it in advance, which makes the auction equivalent to a second price sealed bid auction as described in class (so the winner pays just above the previous player’s maximum bid).

Example: The Sword of a Thousand Truths drops. I open bidding with 3, in an effort to pay as little as possible. Jim bids 5, Sarah bids 10, and we go up in increments of 5 until Sarah drops out at 50. Jim bids 60, I bid 70, Jim bids 80, I bid 90, and Jim says “out” - he might’ve chosen to go to 100, or hope that 90 was my value, and bid 91 to beat me and minimize his cost. It’s possible I could’ve bid 81 or 85 and beat him, but I don’t know that - so while I beat him in a more efficient number of bids, I also might have overpaid.

Other things to think about: Differing prices of items over time, using a zero-sum acquisition system to minimize inflation, optimal strategies vs. reality (such as setting larger bidding increments to save time).