2011/05/31 by Filippo Radicchi, Andrea Baronchelli, Luı́s A. Nunes Amaral +1 · 37 citations
Biochemistry, Genetics and Molecular Biology · Computer Science · Physics and Astronomy · Social Sciences · #Auction theory #Bid shading #Bidding #Biology #Business #Common value auction #Computer science #Database transaction #Diffusion and Search Dynamics #Economics #Evolution and Genetic Dynamics #Evolutionary Game Theory and Cooperation #Foraging #Forward auction #Generalized second-price auction #Irrationality #Microeconomics #Profit (economics) #Proxy bid #Rationality #Unique bid auction #cs.SI #physics.soc-ph
paper · pdf · doi:10.1371/journal.pone.0029910
published in PLoS ONE 7(1), e29910 (Public Library of Science) · 36 pages, 30 figures, 5 tables
openalex publication_date 2012/01/18 · arxiv created 2012/01/19 · arxiv updated 2012/01/20 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/05
Information technology has revolutionized the traditional structure of markets. The removal of geographical and time constraints has fostered the growth of online auction markets, which now include millions of economic agents worldwide and annual transaction volumes in the billions of dollars. Here, we analyze bid histories of a little studied type of online auctions--lowest unique bid auctions. Similarly to what has been reported for foraging animals searching for scarce food, we find that agents adopt Lévy flight search strategies in their exploration of "bid space". The Lévy regime, which is characterized by a power-law decaying probability distribution of step lengths, holds over nearly three orders of magnitude. We develop a quantitative model for lowest unique bid online auctions that reveals that agents use nearly optimal bidding strategies. However, agents participating in these auctions do not optimize their financial gain. Indeed, as long as there are many auction participants, a rational profit optimizing agent would choose not to participate in these auction markets.