Rationality, irrationality and escalating behavior in lowest unique bid auctions.

ABSTRACT: 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 tha

SUBMITTER: Radicchi F 

PROVIDER: S-EPMC3261157 | biostudies-literature | 2012

REPOSITORIES: biostudies-literature