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Emotions and Economic Shocks in a First-Price Auction

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Author Info
Ronald Bosman () (De Nederlandsche Bank)
Arno Riedl () (Faculty of Economics and Econometrics, University of Amsterdam)

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Abstract

We investigate experimentally whether emotions affect bidding behavior in a first price auction. To induce emotions, we confront subjects after a first auction series with a positive or negative random economic shock. We then explore the relation between emotions and bidding behavior in a second auction series. Our main results are: (i) the economic shock has a substantial impact on the experienced emotions of bidders; (ii) the emotional state systematically influences bidding behavior. In particular, negative emotions induce more competitive bidding. Our findings show that for a good understanding of bidder behavior the emotions have to be taken into account.

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Publisher Info
Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 03-056/1.

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Date of creation: 19 Jun 2003
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Handle: RePEc:dgr:uvatin:20030056

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Web page: http://www.tinbergen.nl/

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Related research
Keywords: auction; economic shock; emotion; experiment.;

Find related papers by JEL classification:
A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

References listed on IDEAS
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  1. Richard H. Thaler, 2000. "From Homo Economicus to Homo Sapiens," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 133-141, Winter. [Downloadable!] (restricted)
  2. Caplin, Andrew & Leahy, John, 1997. "Psychological Expected Utility Theory and Anticipatory Feelings," Working Papers 97-37, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
    Other versions:
  3. Loewenstein, George, 1996. "Out of Control: Visceral Influences on Behavior," Organizational Behavior and Human Decision Processes, Elsevier, vol. 65(3), pages 272-292, March. [Downloadable!] (restricted)
  4. Pillutla, Madan M. & Murnighan, J. Keith, 1996. "Unfairness, Anger, and Spite: Emotional Rejections of Ultimatum Offers," Organizational Behavior and Human Decision Processes, Elsevier, vol. 68(3), pages 208-224, December. [Downloadable!] (restricted)
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  7. Jon Elster, 1998. "Emotions and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 47-74, March. [Downloadable!] (restricted)
  8. Kirchsteiger, G. & Rigotti, L. & Rustichini, A., 2000. "Your morals are your moods," Discussion Paper 122, Tilburg University, Center for Economic Research. [Downloadable!]
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  9. Isen, Alice M. & Geva, Nehemia, 1987. "The influence of positive affect on acceptable level of risk: The person with a large canoe has a large worry," Organizational Behavior and Human Decision Processes, Elsevier, vol. 39(2), pages 145-154, April. [Downloadable!] (restricted)
  10. Charness, Gary & Grosskopf, Brit, 2001. "Relative payoffs and happiness: an experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 45(3), pages 301-328, July. [Downloadable!] (restricted)
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  11. John C. Ham & John H. Kagel & Steven F. Lehrer, 2000. "Randomization, Endogeneity and Laboratory Experiments," Econometric Society World Congress 2000 Contributed Papers 1524, Econometric Society. [Downloadable!]
  12. Cox, James C & Smith, Vernon L & Walker, James M, 1988. " Theory and Individual Behavior of First-Price Auctions," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 61-99, March.
  13. Lucking-Reiley, David, 2000. "Auctions on the Internet: What's Being Auctioned, and How?," Journal of Industrial Economics, Blackwell Publishing, vol. 48(3), pages 227-52, September. [Downloadable!] (restricted)
  14. Ronald Bosman & Frans van Winden, 2002. "Emotional Hazard in a Power-to-take Experiment," Economic Journal, Royal Economic Society, vol. 112(476), pages 147-169, January. [Downloadable!] (restricted)
  15. Isaac, R Mark & James, Duncan, 2000. " Just Who Are You Calling Risk Averse?," Journal of Risk and Uncertainty, Springer, vol. 20(2), pages 177-87, March. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Dürsch, Peter & Servátka, Maros, 2007. "Risky Punishment and Reward in the Prisoner," Sonderforschungsbereich 504 Publications 07-62, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
  2. Peter Duersch & Maros Servátka, 2007. "Risky Punishment and Reward in the Prisoner’s Dilemma," Working Papers 0451, University of Heidelberg, Department of Economics, revised Sep 2007. [Downloadable!]
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