The Psychological Force Model for Lowest Unique Bid Auction

Rui Hu, Jinzhong Guo, Qinghua Chen () and Tao Zheng
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Rui Hu: Beijing Normal University
Jinzhong Guo: Xinjiang University
Qinghua Chen: Beijing Normal University
Tao Zheng: Beijing Normal University

Computational Economics, 2017, vol. 50, issue 4, No 6, 655-667

Abstract: Abstract We study a type of complex system arising from economics, the lowest unique bid auction (LUBA) system which is a new generation of online markets. Different from the traditional auction in which the winner is who bids the highest price, in LUBA, the winner is whoever places the lowest of all unique bids. In this paper, we propose a multi-agent model to factually describes the human psychologies of the decision-making process in LUBA. The model produces bid-price distributions that are in excellent agreement with those from the real data, including the whole inverted-J shape which is a general feature of the real bid price distribution, and the exponential decreasing shape in the higher price range. This implies that it is possible for us to capture the essential features of human psychologies in the competitive environment as exemplified by LUBA and that we may provide significant quantitative insights into complex socio-economic phenomena.

Keywords: Lowest unique bid auction; Psychological force; Multi-agent model (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s10614-016-9614-z

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