2010/07/24 by Marco Scarsini, Scarsini, Marco, Eilon Solan +3
Business, Management and Accounting · Decision Sciences · Economics, Econometrics and Finance · Mathematics · #Auction Theory and Applications #Consumer Market Behavior and Pricing #FOS: Economics and business #FOS: Mathematics #Game Theory and Applications #Optimization and Control (math.OC) #Probability (math.PR) #Trading and Market Microstructure (q-fin.TR) #math.OC #math.PR #q-fin.TR
paper · pdf · doi:10.48550/arxiv.1007.4264
arxiv created 2010/07/24 · openalex publication_date 2010/07/24 · arxiv updated 2010/07/27 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
We consider a class of auctions (Lowest Unique Bid Auctions) that have achieved a considerable success on the Internet. Bids are made in cents (of euro) and every bidder can bid as many numbers as she wants. The lowest unique bid wins the auction. Every bid has a fixed cost, and once a participant makes a bid, she gets to know whether her bid was unique and whether it was the lowest unique. Information is updated in real time, but every bidder sees only what's relevant to the bids she made. We show that the observed behavior in these auctions differs considerably from what theory would prescribe if all bidders were fully rational. We show that the seller makes money, which would not be the case with rational bidders, and some bidders win the auctions quite often. We describe a possible strategy for these bidders.