IDEAS home Printed from https://ideas.repec.org/a/plo/pone00/0029910.html
   My bibliography  Save this article

Rationality, Irrationality and Escalating Behavior in Lowest Unique Bid Auctions

Author

Listed:
  • Filippo Radicchi
  • Andrea Baronchelli
  • Luís A N Amaral

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 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.

Suggested Citation

  • Filippo Radicchi & Andrea Baronchelli & Luís A N Amaral, 2012. "Rationality, Irrationality and Escalating Behavior in Lowest Unique Bid Auctions," PLOS ONE, Public Library of Science, vol. 7(1), pages 1-8, January.
    • Handle: RePEc:plo:pone00:0029910
    DOI: 10.1371/journal.pone.0029910
    as

    Download full text from publisher

    File URL: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0029910
    Download Restriction: no
    File URL: https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0029910&type=printable
    Download Restriction: no
    File URL: https://libkey.io/10.1371/journal.pone.0029910?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. G. M. Viswanathan & Sergey V. Buldyrev & Shlomo Havlin & M. G. E. da Luz & E. P. Raposo & H. Eugene Stanley, 1999. "Optimizing the success of random searches," Nature, Nature, vol. 401(6756), pages 911-914, October.
    2. David W. Sims & Emily J. Southall & Nicolas E. Humphries & Graeme C. Hays & Corey J. A. Bradshaw & Jonathan W. Pitchford & Alex James & Mohammed Z. Ahmed & Andrew S. Brierley & Mark A. Hindell & David, 2008. "Scaling laws of marine predator search behaviour," Nature, Nature, vol. 451(7182), pages 1098-1102, February.
    3. D. Brockmann & L. Hufnagel & T. Geisel, 2006. "The scaling laws of human travel," Nature, Nature, vol. 439(7075), pages 462-465, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Baronchelli, Andrea & Radicchi, Filippo, 2013. "Lévy flights in human behavior and cognition," Chaos, Solitons & Fractals, Elsevier, vol. 56(C), pages 101-105.
    2. Cancan Zhou & Hongguang Dong & Rui Hu & Qinghua Chen, 2015. "Smarter than Others? Conjectures in Lowest Unique Bid Auctions," PLOS ONE, Public Library of Science, vol. 10(4), pages 1-13, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ferreira, A.S. & Raposo, E.P. & Viswanathan, G.M. & da Luz, M.G.E., 2012. "The influence of the environment on Lévy random search efficiency: Fractality and memory effects," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(11), pages 3234-3246.
    2. E P Raposo & F Bartumeus & M G E da Luz & P J Ribeiro-Neto & T A Souza & G M Viswanathan, 2011. "How Landscape Heterogeneity Frames Optimal Diffusivity in Searching Processes," PLOS Computational Biology, Public Library of Science, vol. 7(11), pages 1-8, November.
    3. Pauline Formaglio & Marina E. Wosniack & Raphael M. Tromer & Jaderson G. Polli & Yuri B. Matos & Hang Zhong & Ernesto P. Raposo & Marcos G. E. Luz & Rogerio Amino, 2023. "Plasmodium sporozoite search strategy to locate hotspots of blood vessel invasion," Nature Communications, Nature, vol. 14(1), pages 1-11, December.
    4. Toru Nakamura & Toru Takumi & Atsuko Takano & Fumiyuki Hatanaka & Yoshiharu Yamamoto, 2013. "Characterization and Modeling of Intermittent Locomotor Dynamics in Clock Gene-Deficient Mice," PLOS ONE, Public Library of Science, vol. 8(3), pages 1-8, March.
    5. LaScala-Gruenewald, Diana E. & Mehta, Rohan S. & Liu, Yu & Denny, Mark W., 2019. "Sensory perception plays a larger role in foraging efficiency than heavy-tailed movement strategies," Ecological Modelling, Elsevier, vol. 404(C), pages 69-82.
    6. Toman, Kellan & Voulgarakis, Nikolaos K., 2022. "Stochastic pursuit-evasion curves for foraging dynamics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 597(C).
    7. Qi, Jie & Rong, Zhihai, 2013. "The emergence of scaling laws search dynamics in a particle swarm optimization," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(6), pages 1522-1531.
    8. Danish A. Ahmed & Sergei V. Petrovskii & Paulo F. C. Tilles, 2018. "The “Lévy or Diffusion” Controversy: How Important Is the Movement Pattern in the Context of Trapping?," Mathematics, MDPI, vol. 6(5), pages 1-27, May.
    9. Nauta, Johannes & Simoens, Pieter & Khaluf, Yara, 2022. "Group size and resource fractality drive multimodal search strategies: A quantitative analysis on group foraging," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 590(C).
    10. Sepideh Bazazi & Frederic Bartumeus & Joseph J Hale & Iain D Couzin, 2012. "Intermittent Motion in Desert Locusts: Behavioural Complexity in Simple Environments," PLOS Computational Biology, Public Library of Science, vol. 8(5), pages 1-10, May.
    11. Tomassini, Marco, 2016. "Lévy flights in neutral fitness landscapes," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 448(C), pages 163-171.
    12. Masato S Abe & Masakazu Shimada, 2015. "Lévy Walks Suboptimal under Predation Risk," PLOS Computational Biology, Public Library of Science, vol. 11(11), pages 1-16, November.
    13. Danish A Ahmed & Ali R Ansari & Mudassar Imran & Kamal Dingle & Michael B Bonsall, 2021. "Mechanistic modelling of COVID-19 and the impact of lockdowns on a short-time scale," PLOS ONE, Public Library of Science, vol. 16(10), pages 1-20, October.
    14. Baronchelli, Andrea & Radicchi, Filippo, 2013. "Lévy flights in human behavior and cognition," Chaos, Solitons & Fractals, Elsevier, vol. 56(C), pages 101-105.
    15. Alexander Maye & Chih-hao Hsieh & George Sugihara & Björn Brembs, 2007. "Order in Spontaneous Behavior," PLOS ONE, Public Library of Science, vol. 2(5), pages 1-14, May.
    16. Boschetti, Fabio & Vanderklift, Mathew A., 2015. "How the movement characteristics of large marine predators influence estimates of their abundance," Ecological Modelling, Elsevier, vol. 313(C), pages 223-236.
    17. Burnecki, Krzysztof & Sikora, Grzegorz, 2017. "Identification and validation of stable ARFIMA processes with application to UMTS data," Chaos, Solitons & Fractals, Elsevier, vol. 102(C), pages 456-466.
    18. Tongtong Liu & Zheng Yang & Yi Zhao & Chenshu Wu & Zimu Zhou & Yunhao Liu, 2018. "Temporal understanding of human mobility: A multi-time scale analysis," PLOS ONE, Public Library of Science, vol. 13(11), pages 1-15, November.
    19. Toby A. Patterson & Alison Parton & Roland Langrock & Paul G. Blackwell & Len Thomas & Ruth King, 2017. "Statistical modelling of individual animal movement: an overview of key methods and a discussion of practical challenges," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 101(4), pages 399-438, October.
    20. Ndibatya, Innocent & Booysen, M.J., 2021. "Characterizing the movement patterns of minibus taxis in Kampala's paratransit system," Journal of Transport Geography, Elsevier, vol. 92(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:plo:pone00:0029910. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: plosone (email available below). General contact details of provider: https://journals.plos.org/plosone/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.