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Getting Carried Away in Auctions as Imperfect Value Discovery

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Author Info

  • Eric Rasmusen

    (Indiana University)

Abstract

Bidders have to decide whether and when to incur the cost of estimating their own values in auctions. This can explain why people seem to get carried away, bidding higher than they had planned before the auction and then finding they had paid more than the object was worth to them. Even when such behavior is rational, ex ante, it may be perceived as irrational if one ignores other situations in which people revise their bid ceilings upwards and are happy when that enables them to win the auction.

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File URL: http://128.118.178.162/eps/io/papers/0409/0409001.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Industrial Organization with number 0409001.

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Length: 30 pages
Date of creation: 04 Sep 2004
Date of revision:
Handle: RePEc:wpa:wuwpio:0409001

Note: Type of Document - pdf; pages: 30
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Web page: http://128.118.178.162

Related research

Keywords: private value; auctions; behavioral; e-bay; reservation price;

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References

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  1. Jeremy Bulow & Paul Klemperer, 2002. "Prices and the Winner's Curse," RAND Journal of Economics, The RAND Corporation, vol. 33(1), pages 1-21, Spring.
  2. Eric B. Rasmusen, 2001. "Starategic Implications of Uncertainty Over One's Own Private Value in Auctions," CIRJE F-Series CIRJE-F-127, CIRJE, Faculty of Economics, University of Tokyo.
  3. Eric Rasmusen, 2004. "When Does Extra Risk Strictly Increase the Value of Options?," Finance 0409004, EconWPA.
  4. Nicola Persico, 1997. "Information Acquisition in Auctions," UCLA Economics Working Papers 762, UCLA Department of Economics.
  5. John Asker, 2000. "Bidding up, buying out and cooling-off: an examination of auctions with withdrawal rights," Economic Theory, Springer, vol. 16(3), pages 585-611.
  6. Alvin E. Roth & Axel Ockenfels, 2002. "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," American Economic Review, American Economic Association, vol. 92(4), pages 1093-1103, September.
  7. Rasmusen Eric Bennett, 2001. "Explaining Incomplete Contracts as the Result of Contract-Reading Costs," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 1(1), pages 1-39, October.
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Cited by:
  1. Eric B. Rasmusen, 2001. "Starategic Implications of Uncertainty Over One's Own Private Value in Auctions," CIRJE F-Series CIRJE-F-127, CIRJE, Faculty of Economics, University of Tokyo.

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