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Learning to bid, but not to quit – Experience and Internet auctions

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  • Bramsen, Jens-Martin

Abstract

A classic argument in economics is that experience in the market place will eliminate mistakes and cognitive biases. Internet auctions are a popular market were some bidders gather extensive experience. In a unique data set from a Scandinavian auction site I question if and what bidders learn. At face value experienced bidders do adapt better bidding strategies. However, the so-called pseudo-endowment effect does not disappear. Regardless of their experience, bidders will be inclined to increase their willingness to pay as a response to having had “ownership” (the leading bid) before being outbid. Thus, this data can confirm that feedback, and especially negative feedback, seems to be a critical component in learning.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14815.

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Date of creation: Jun 2008
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Handle: RePEc:pra:mprapa:14815

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Related research

Keywords: Experience; Learning; Internet auctions; Reference-Dependent Preferences; Endowment Effect; Bidding behavior; eBay.;

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  1. John List, 2003. "Does market experience eliminate market anomalies?," Natural Field Experiments 00297, The Field Experiments Website.
  2. Haigh, Michael S. & List, John A., 2002. "Do Professional Traders Exhibit Myopic Loss Aversion? An Experimental Analysis," Working Papers 28554, University of Maryland, Department of Agricultural and Resource Economics.
  3. Braga, Jacinto & Humphrey, Steven J. & Starmer, Chris, 2009. "Market experience eliminates some anomalies--and creates new ones," European Economic Review, Elsevier, vol. 53(4), pages 401-416, May.
  4. Rodney Garratt & John Wooders, 2010. "Efficiency in Second-Price Auctions: A New Look at Old Data," Review of Industrial Organization, Springer, vol. 37(1), pages 43-50, August.
  5. Bramsen, Jens-Martin, 2008. "A pseudo-endowment effect in internet auctions," MPRA Paper 14813, University Library of Munich, Germany.
  6. John List, 2004. "Neoclassical theory versus prospect theory: Evidence from the marketplace," Framed Field Experiments 00174, The Field Experiments Website.
  7. Bramsen, Jens-Martin, 2008. "Bid early and get it cheap - Timing effects in Internet auctions," MPRA Paper 14811, University Library of Munich, Germany.
  8. Ockenfels, Axel & Roth, Alvin E., 2006. "Late and multiple bidding in second price Internet auctions: Theory and evidence concerning different rules for ending an auction," Games and Economic Behavior, Elsevier, vol. 55(2), pages 297-320, May.
  9. Patrick Bajari & Ali Horta�su, 2004. "Economic Insights from Internet Auctions," Journal of Economic Literature, American Economic Association, vol. 42(2), pages 457-486, June.
  10. Graham Loomes & Chris Starmer & Robert Sugden, 2003. "Do Anomalies Disappear in Repeated Markets?," Economic Journal, Royal Economic Society, vol. 113(486), pages C153-C166, March.
  11. Axel Ockenfels & Alvin E. Roth, 2001. "The Timing of Bids in Internet Auctions: Market Design, Bidder Behavior, and Artificial Agents," Papers on Strategic Interaction 2002-33, Max Planck Institute of Economics, Strategic Interaction Group.
  12. Livingston, 2010. "The Behavior Of Inexperienced Bidders In Internet Auctions," Economic Inquiry, Western Economic Association International, vol. 48(2), pages 237-253, 04.
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