Lowest Unique Bid Auctions

Scarsini, Marco and Solan, Eilon and Vieille, Nicolas (2010) Lowest Unique Bid Auctions. [Working Paper]. p. 26. (Submitted)

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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.

Item Type: Report / Paper (Working Paper)
Research documents and activity classification: Working Papers > Non-Refereed Working Papers / of national relevance only
Divisions: Department of Business and Management
Additional Information: The paper is provided by Cornell University Library (http://arxiv.org/) in its series "Quantitative Finance Papers" with number 1007.4264.
Uncontrolled Keywords: Auctions, interval strategy, rational bidders, bounded complexity, Nash equilibrium.
MIUR Scientific Area: Area 13 - Economics and Statistics > SECS-S/01 Statistics
Deposited by: Maria Teresa Nisticò
Date Deposited: 21 Dec 2010 10:40
Last Modified: 22 Apr 2015 00:13
URI: http://eprints.luiss.it/id/eprint/882


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