The Econophysics Blog

This blog is dedicated to exploring the application of quantiative tools from mathematics, physics, and other natural sciences to issues in finance, economics, and the social sciences. The focus of this blog will be on tools, methodology, and logic. This blog will also occasionally delve into philosophical issues surrounding quantitative finance and quantitative social science.

Saturday, June 16, 2007

eBay 'Sniping' and the Power Law

'Sniping' -- where a bidder waits until the last moments of an auction to place a bid -- is a tactic used by some eBay auction aficionados to gain an upper hand in bidding for an item.

According to an article (June 23, 2006) in the New Scientist, two South Korean physicists, Byungnam Kahng and Inchang Yang, found that a power law equation explained the observed patterns in eBay auction bidding. The power law reflects the fact that most of the bidding for items tend to take place near the end of an auction. Thus, according to their article in Physical Review E (vol. 73, p 067101, 2006), 'sniping' is a rational strategy to employ in eBay bidding.

This research builds on the work of experimental economist / game theorist, Alvin Roth. His article in the American Economic Review (vol 92, p 1093, 2002) came to similar conclusions.

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