Dan Ariely: Auction Fever The Effect Of Opponents On Product Valuations

Abstract (Via MIT)

The wide adoption of dynamic second-price auctions as the format of choice for Internet-based (online) transactions has created an interest in understanding how individuals behave in such environments. The current work concentrates on two dynamic effects, which we call quasi-endowment and opponent effect, and finds that these effects may result in over-bidding. The results of two experimental auctions—one involving hypothetical bids and the other real-money bids—demonstrate that bids reflect valuations that include the nonnormative influences of the two factors. Quasi-endowment and opponent effects could lead to the behaviors of repeated bidding and sniping commonly observed in second-price online auctions such as eBay.

Visit: www.predictablyirrational.com/pdfs/auctionJIM.pdf

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11. January 2010 by Miguel Barbosa
Categories: Behavioral Economics, Curated Readings | Leave a comment

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