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The Bidder's Curse

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  • Young Han Lee
  • Ulrike Malmendier

Abstract

We employ a novel approach to identify overbidding in the field. We compare auction prices to fixed prices for the same item on the same webpage. In detailed board-game data, 42 percent of auctions exceed the simultaneous fixed price. The result replicates in a broad cross-section of auctions (48 percent). A small fraction of overbidders, 17 percent, suffices to generate the overbidding. The observed behavior is inconsistent with rational behavior, even allowing for uncertainty and switching costs, since also the expected auction price exceeds the fixed price. Limited attention to outside options is most consistent with our results.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13699.

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Date of creation: Dec 2007
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Handle: RePEc:nbr:nberwo:13699

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Cited by:
  1. S. Dellavigna., 2011. "Psychology and Economics: Evidence from the Field," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.
  2. Dennis Halcoussis & Timothy Mathews, 2007. "eBay auctions for Third Eye Blind concert tickets," Journal of Cultural Economics, Springer, vol. 31(1), pages 65-78, March.
  3. Bramsen, Jens-Martin, 2008. "A pseudo-endowment effect in internet auctions," MPRA Paper 14813, University Library of Munich, Germany.
  4. Bramsen, Jens-Martin, 2008. "Bid early and get it cheap - Timing effects in Internet auctions," MPRA Paper 14811, University Library of Munich, Germany.
  5. Schmöller, Arno, 2010. "Bidding Behavior, Seller Strategies, and the Utilization of Information in Auctions for Complex Goods," Munich Dissertations in Economics 11175, University of Munich, Department of Economics.

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