Equilibrium strategy and population-size effects in lowest unique bid auctions

Simone Pigolotti, Sebastian Bernhardsson, Jeppe Juul, Gorm Galster and Pierpaolo Vivo
Additional contact information
Simone Pigolotti: NBI - Niels Bohr Institute [Copenhagen] - Faculty of Science [Copenhagen] - UCPH - University of Copenhagen = Københavns Universitet, Dept. de Fisica i Eng. Nuclear - UPC - Universitat Politècnica de Catalunya = Université polytechnique de Catalogne [Barcelona]
Sebastian Bernhardsson: NBI - Niels Bohr Institute [Copenhagen] - Faculty of Science [Copenhagen] - UCPH - University of Copenhagen = Københavns Universitet, FOI - Swedish Defence Research Agency [Stockholm]
Jeppe Juul: NBI - Niels Bohr Institute [Copenhagen] - Faculty of Science [Copenhagen] - UCPH - University of Copenhagen = Københavns Universitet
Gorm Galster: NBI - Niels Bohr Institute [Copenhagen] - Faculty of Science [Copenhagen] - UCPH - University of Copenhagen = Københavns Universitet
Pierpaolo Vivo: LPTMS - Laboratoire de Physique Théorique et Modèles Statistiques - UP11 - Université Paris-Sud - Paris 11 - CNRS - Centre National de la Recherche Scientifique

Post-Print from HAL

Abstract: In lowest unique bid auctions, $N$ players bid for an item. The winner is whoever places the \emph{lowest} bid, provided that it is also unique. We use a grand canonical approach to derive an analytical expression for the equilibrium distribution of strategies. We then study the properties of the solution as a function of the mean number of players, and compare them with a large dataset of internet auctions. The theory agrees with the data with striking accuracy for small population size $N$, while for larger $N$ a qualitatively different distribution is observed. We interpret this result as the emergence of two different regimes, one in which adaptation is feasible and one in which it is not. Our results question the actual possibility of a large population to adapt and find the optimal strategy when participating in a collective game.

Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Published in Physical Review Letters, 2012, 108, pp.088701. ⟨10.1103/PhysRevLett.108.088701⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00681002

DOI: 10.1103/PhysRevLett.108.088701

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().