A self-organized criticality participative pricing mechanism for selling zero-marginal cost products

TL;DR

This paper introduces a novel participative pricing mechanism based on self-organized criticality for zero-marginal cost products, enabling continuous bidding without deadlines and capturing market dynamics.

Contribution

It presents a new auction model that eliminates deadlines, incorporates consumer preferences, and exhibits self-organized criticality for pricing zero-marginal cost products.

Findings

The model exhibits a critical price with guaranteed acceptance above it.

Avalanches of sales occur above the critical price, reflecting market dynamics.

The mechanism is suitable for startups aiming for profit and market dissemination.

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. Current auction mechanisms establish a time deadline for the auction to take place. This deadline is set to increase the number of bidders and thus the final offering price. Consumers want to obtain the product as quickly as possible from the moment they become interested in it, and this time does not always coincide with the seller's deadline. Naturally, consumers also want to pay a price they consider "fair". Here we introduce an auction model where buyers continuously place bids and the challenge is to decide quickly 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 of particular interest for startup companies interested in profit as well as making the product known on the market.