Lowest Unique Bid Auctions with Signals
AbstractA 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 112.
Length: 29 pages
Date of creation: May 2009
Date of revision: Sep 2009
Lowest unique bid auctions; Signals; Bounded rationality.;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-06-10 (All new papers)
- NEP-CTA-2009-06-10 (Contract Theory & Applications)
- NEP-GTH-2009-06-10 (Game Theory)
- NEP-UPT-2009-06-10 (Utility Models & Prospect Theory)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Östling, Robert & Wang, Joseph Tao-yi & Chou, Eileen & Camerer, Colin F., 2007.
"Testing Game Theory in the Field: Swedish LUPI Lottery Games,"
Working Paper Series in Economics and Finance
671, Stockholm School of Economics, revised 30 Oct 2007.
- Robert �stling & Joseph Tao-yi Wang & Eileen Y. Chou & Colin F. Camerer, 2011. "Testing Game Theory in the Field: Swedish LUPI Lottery Games," American Economic Journal: Microeconomics, American Economic Association, vol. 3(3), pages 1-33, August.
- Marco Scarsini & Eilon Solan & Nicolas Vieille, 2010. "Lowest Unique Bid Auctions," Papers 1007.4264, arXiv.org.
- Andrea Gallice, 2012. "Price Reveal Auctions," Working papers 015, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
- Andrea Gallice, 2010. "Price Reveal Auctions on the Internet," Carlo Alberto Notebooks 147, Collegio Carlo Alberto.
- Unique bid auction in Wikipedia English ne '')
- Wikipedia:Reference desk/Archives/Mathematics/2010 January 29 in Wikipedia English ne '')
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Giovanni Bert).
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.