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Reserve prices as reference points - Evidence from auctions for football players at Hattrick.org

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  • Trautmann, Stefan T.
  • Traxler, Christian

Abstract

We study the impact of sellers' reserve prices on transfer prices in online auctions of virtual football players at Hattrick.org. We introduce an empirical model that distinguishes between two separate effects from public reserve prices: (1) a mechanical effect, which is driven by the design of the English auction and (2) a psychological reference-dependence effect through reserve prices serving as reference points. The psychological effect has recently been introduced in behavioral models of situations where agents are uncertain about their own willingness-to-pay, while the mechanical effect is well captured by standard auction theory. Controlling for censoring when players are not sold, both effects are observed. Once we account for the potential endogeneity of reserve prices, however, we do not find evidence for reference dependence in Hattrick auctions.

Suggested Citation

  • Trautmann, Stefan T. & Traxler, Christian, 2010. "Reserve prices as reference points - Evidence from auctions for football players at Hattrick.org," Journal of Economic Psychology, Elsevier, vol. 31(2), pages 230-240, April.
  • Handle: RePEc:eee:joepsy:v:31:y:2010:i:2:p:230-240
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    References listed on IDEAS

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    Cited by:

    1. Liu, Kang Ernest & Shiu, Ji-Liang & Sun, Chia-Hung, 2013. "How different are consumers in Internet auction markets? Evidence from Japan and Taiwan," Japan and the World Economy, Elsevier, vol. 28(C), pages 1-12.
    2. Han-Jang No & Dai-Won Kim & Jung-Suk Yu, 2017. "Do Reserve Prices Yield Reference Price Effects in Korean Court Auctions of Residential Real Estate?," International Real Estate Review, Asian Real Estate Society, vol. 20(1), pages 75-104.
    3. Mathieu Lefebvre & Ferdinand Vieider, 2013. "Reining in excessive risk-taking by executives: the effect of accountability," Theory and Decision, Springer, vol. 75(4), pages 497-517, October.
    4. Arbel, Yuval & Ben-Shahar, Danny & Gabriel, Stuart, 2014. "Anchoring and housing choice: Results of a natural policy experiment," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 68-83.
    5. Englmaier, Florian & Schmöller, Arno, 2010. "Determinants and Effects of Reserve Prices in Hattrick Auctions," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 326, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    6. Ricardo Gonçalves, 2013. "Empirical Evidence on the Impact of Reserve Prices in E nglish Auctions," Journal of Industrial Economics, Wiley Blackwell, vol. 61(1), pages 202-242, March.
    7. Azar, Ofer H., 2013. "Competitive strategy when consumers are affected by reference prices," Journal of Economic Psychology, Elsevier, vol. 39(C), pages 327-340.
    8. Florian Englmaier & Arno Schmöller, 2008. "Reserve Price Formation in Online Auctions," CESifo Working Paper Series 2374, CESifo Group Munich.
    9. Boudreau, James W. & Shunda, Nicholas, 2016. "Sequential auctions with budget constraints: Evidence from fantasy basketball auction drafts," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 62(C), pages 8-22.
    10. Nichols, Bridget Satinover, 2012. "The development, validation, and implications of a measure of consumer competitive arousal (CCAr)," Journal of Economic Psychology, Elsevier, vol. 33(1), pages 192-205.
    11. 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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