English versus Vickrey auctions with loss-averse bidders

Evidence suggests that people evaluate outcomes relative to expectations. I analyze this expectations-based loss aversion à la Kőszegi and Rabin in the context of dynamic and static auctions, where the reference point is given by the (endogenous) equilibrium outcome. If agents update their reference point during the auction, the arrival of information crucially affects equilibrium behavior. Consequently, I show that—even with independent private values—the Vickrey auction yields strictly higher revenue than the (ascending clock) English auction, violating the well-known revenue equivalence.