4,547 research outputs found
Lowest Unique Bid Auctions with Signals
A lowest unique bid auction allocates a good to the agent who submits the lowest bid that is not matched by any other bid. This peculiar auction format is becoming increasingly popular over the Internet. We show that when all the bidders are rational such a selling mechanism can lead to positive profits only if there is a large mismatch between the auctioneer's and the bidders' valuation. On the contrary, the auction becomes highly lucrative if at least some bidders are myopic. In this second case, we analyze the key role played by the existence of some private signals that the seller sends to the bidders about the status of their bids. Data about actual auctions confirm the profitability of the mechanism and the limited rationality of the bidders.Lowest unique bid auctions; Signals; Bounded rationality.
Lowest Unique Bid Auctions
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
Least Unmatched Price Auctions: A First Approach
Least-Unmatched Price Auctions have become a popular format of TV and radio shows. Increasingly, they are also applied in internet trading. In these auctions the lowest single (unique) bid wins. We analyze the game-theoretic solution of least unmatched price auctions when prize, bidding cost and the number of participants are known. We use a large data-set of such auctions in order to contrast actual behavior of players with game-theoretic predictions. In the aggregate, bidding behaviour seems to conform with a Nash equilibrium in mixed strategies.games, experiments
Why Every Economist Should Learn Some Auction Theory
This is an Invited paper for the World Congress of the Econometric Society held in Seattle in August 2000. We discuss the strong connections between auction theory and "standard" economic theory, and argue that auction-theoretic tools and intuitions can provide useful arguments and insights in a broad range of mainstream economic settings that do not, at first sight, look like auctions. We also discuss some more obvious applications, especially to industrial organization.Auctions, Bidding, Auction Theory, Private Values, Common Values, Mechanism Design, Litigation, Stock Markets, Queues, Financial Crashes, Brand Loyalty, War of Attrition, Bertrand, Perfect Competition, E-Commerce, Spectrum Auctions, Treasury Auctions, Electricity
Multiagent model and mean field theory of complex auction dynamics
Acknowledgements We are grateful to Ms Yinan Zhao for providing the data and to Yuzhong Chen and Cancan Zhou for discussions and suggestions. This work was supported by ARO under Grant No. W911NF-14-1-0504 and by NSFC under Grants Nos. 11275003 and 61174165. The visit of QC to Arizona State University was partially sponsored by the State Scholarship Fund of China.Peer reviewedPublisher PD
Testing Game Theory in the Field: Swedish LUPI Lottery Games
Game theory is usually difficult to test precisely in the field because predictions typically
depend sensitively on features that are not controlled or observed. We conduct one such
test using field data from the Swedish lowest unique positive integer (LUPI) game. In the
LUPI game, players pick positive integers and whoever chose the lowest unique number
wins a fixed prize. Theoretical equilibrium predictions are derived assuming Poisson-
distributed uncertainty about the number of players, and tested using both field and
laboratory data. The field and lab data show similar patterns. Despite various deviations
from equilibrium, there is a surprising degree of convergence toward equilibrium. Some
of the deviations from equilibrium can be rationalized by a cognitive hierarchy model
Auction Fever: Theory and Experimental Evidence
It is not a secret that certain auction formats yield on average higher prices than others. The phenomenon that dynamic auctions are more likely to elicit higher bids than static one-shot auctions is often associated with the term ''auction fever.'' On a psychological level, we consider the so-called pseudo-endowment effect as largely responsible for peoplesā tendency to submit higher bids, potentially amplified by the source-dependence effect. The phenomenon of auction fever is replicated in an experimental investigation of different auction formats within a private values framework where bidders have private but incomplete knowledge of their valuation for a hypothetical good. We suggest this assumption to be more realistic than definite private values, as assumed in the traditional IPV model. An additional experimental investigation within the traditional IPV framework does not either reveal any indication for the appearance of auction fever. On the basis of our experimental observations we present a model of reference-dependent utility theory that comprehends the phenomenon by assuming that bidders' reference points are shifted by the pseudo-endowment and the source-dependence effect.
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