After more discussion and thought, we’re going to start with #2 (collateral returned upon bid acceptance). Here’s the reasoning:
This is less complex to implement (and explain to users).
We implemented the bid matching system to provide more stability and confidence to current licensors, but we don’t want to tip the scales too much in favor of incumbents. Increasing the capital requirements and cost for prospective bidders too much could undermine the balance and allocative efficiency that PCO markets aim for.
The basis for the matching penalty should be the new Self-Assessed Value (SAV) rather than the old one. If the pre-bid value is used, it might be tempting for a licensor to continually readjust their SAV to a de minimis value and “wear out” rival bidders while never having to pay any real penalty or taxes (it’s negative expected value for the bidder because they just keep burning gas and locking up capital without getting the parcel). Cody agreed. I’ll create a Github issue for this.
I’m continuing to lean toward being less generous to the current licensor (higher % penalty). I think it needs to hurt to reject/match a bid otherwise we’ll end up with people not being honest about their valuation.
In the long-term, this matching system could hurt highly visible prospective tenants like sports teams and event venues: once a pro sports team tips their hand that they want to buy the parcel for their stadium with a bid, a speculator’s eyes are going to get big. They’ll have been carrying it at a low cost and now can play “hardball in a negotiation” all of a sudden. We know this system isn’t perfect and will need to adjust over time, so we’ll continue to monitor and get feedback on this one.
We have the “static penalty” system up and running now, but I had a thought that we can explore down the road… escalating penalties for repeat bid rejectors.
If squatters are using the bid matching feature “too effectively” then we’ll need to weaken their incumbent position. What if only land licensors with Proof of Humanity/BrightID/Soul Bound Token attestations were granted the right to match bids and each time they exercised the right it increased the penalty for the next time (within a certain timeframe)? Creates an incentive for the adoption of Sybil-resistance mechanisms and weakens the incentive to try to game the market.
Like a lot of these things, having a citizen Kleros Court is a good fail-safe and way to promote the “right” outcome too.