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Rationality, Irrationality and Escalating Behavior in Lowest Unique Bid Auctions

Figure 5

Economic return of agents.

Auction winners tend to pay half of the value of the good, while auctioneers tend to earn twice the value of the good. We consider two different data sets, one regarding lowest unique bid auctions [www.uniquebidhomes.com, (A) and (C)] and the other highest unique bid auctions [www.bidmadness.com.au, (B) and (D)]. The unit is one hundredth of an Australian dollar. (A) Relation between the relative cost to the winner of an auction and her income . indicates the number of bids made by the winner of the auction, is the cost of the fee, indicates the value of the winning bid, and is the value of the good put up for auction. Each point represents an auction. The gray area corresponds to the region of negative return for winners of the auctions. The black line indicates the average value of the relative cost to the winners. Auctions are, on average, very profitable for the agent winning the auction, but the probability of a specific agent winning the auction is very low. Data refer to the data set www.uniquebidhomes.com. (B) Relative income of the auctioneers as a function of their investment . is the number of bids placed by all agents. The gray area denotes the region of negative return for the auctioneers. The black line indicates the average value of the relative profit of the auctioneers. On average, organizing auctions is very profitable. Data refer to the data set www.uniquebidhomes.com. (C) Relation between the relative cost to the winner of an auction and her income for the data set www.bidmadness.com.au. (D) Relative income of the auctioneers as a function of their investment for the data set www.bidmadness.com.au.

doi: https://doi.org/10.1371/journal.pone.0029910.g005