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

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,...

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Autores principales:	Filippo Radicchi, Andrea Baronchelli, Luís A N Amaral
Formato:	article
Lenguaje:	EN
Publicado:	Public Library of Science (PLoS) 2012
Materias:	Medicine R Science Q
Acceso en línea:	https://doaj.org/article/5907a51025c84e85b6170ba854976336
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spelling	oai:doaj.org-article:5907a51025c84e85b6170ba8549763362021-11-18T07:29:57ZRationality, irrationality and escalating behavior in lowest unique bid auctions.1932-620310.1371/journal.pone.0029910https://doaj.org/article/5907a51025c84e85b6170ba8549763362012-01-01T00:00:00Zhttps://www.ncbi.nlm.nih.gov/pmc/articles/pmid/22279553/?tool=EBIhttps://doaj.org/toc/1932-6203Information 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.Filippo RadicchiAndrea BaronchelliLuís A N AmaralPublic Library of Science (PLoS)articleMedicineRScienceQENPLoS ONE, Vol 7, Iss 1, p e29910 (2012)
institution	DOAJ
collection	DOAJ
language	EN
topic	Medicine R Science Q
spellingShingle	Medicine R Science Q Filippo Radicchi Andrea Baronchelli Luís A N Amaral Rationality, irrationality and escalating behavior in lowest unique bid auctions.
description	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.
format	article
author	Filippo Radicchi Andrea Baronchelli Luís A N Amaral
author_facet	Filippo Radicchi Andrea Baronchelli Luís A N Amaral
author_sort	Filippo Radicchi
title	Rationality, irrationality and escalating behavior in lowest unique bid auctions.
title_short	Rationality, irrationality and escalating behavior in lowest unique bid auctions.
title_full	Rationality, irrationality and escalating behavior in lowest unique bid auctions.
title_fullStr	Rationality, irrationality and escalating behavior in lowest unique bid auctions.
title_full_unstemmed	Rationality, irrationality and escalating behavior in lowest unique bid auctions.
title_sort	rationality, irrationality and escalating behavior in lowest unique bid auctions.
publisher	Public Library of Science (PLoS)
publishDate	2012
url	https://doaj.org/article/5907a51025c84e85b6170ba854976336
work_keys_str_mv	AT filipporadicchi rationalityirrationalityandescalatingbehaviorinlowestuniquebidauctions AT andreabaronchelli rationalityirrationalityandescalatingbehaviorinlowestuniquebidauctions AT luisanamaral rationalityirrationalityandescalatingbehaviorinlowestuniquebidauctions
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Rationality, irrationality and escalating behavior in lowest unique bid auctions.

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