A self-organized criticality participative pricing mechanism for selling zero-marginal cost products. (May 2022)

• Record Type: Journal Article
• Authors: Fraiman, Daniel
• Is Part Of: Chaos, solitons and fractals. Volume 158(2022)
• Publication Date: 2022-05
• Subjects: Self-organized criticality -- Participative pricing -- Auction model; Chaotic behavior in systems -- Periodicals; Solitons -- Periodicals; Fractals -- Periodicals; Chaotic behavior in systems; Fractals; Solitons; Periodicals; 003.7
• DOI: 10.1016/j.chaos.2022.112028
• Languages: English
• ISSNs: 0960-0779

Abstract

Abstract: In today's economy, selling a new zero-marginal cost product is a real challenge, as it is difficult to determine a product's "correct" sales price based on its profit and dissemination. As an example, think of the price of a new app or video game. New sales mechanisms for selling this type of product need to be designed, in particular ones that consider consumer preferences and reality. Here we introduce an auction model where buyers continuously place bids and the challenge is to decide whether or not to accept them. The model does not include a deadline for placing bids, and exhibits self-organized criticality; it presents a critical price from which a bid is accepted with probability one, and avalanches of sales above this value are observed. This model is especially interesting for startup companies interested in profit as well as making the product known on the market. Highlights: We introduce a novel participative mechanism of sales. The sales mechanism presents a surprising emergent behavior. The benefits of the model are analyzed in depth and comparisons are made. The SOC model introduced is analytically tractable.