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Bidding Behavior and Decision Costs in Field Experiments

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Listed:
  • John A. List
  • David Lucking-Reiley

Abstract

Whether rationality of economic behavior increases with expected payoffs and decreases with the cognitive cost it takes to formulate an optimal strategy remains an open question. We explore these issues with field data, using individual bids from sealed-bid auctions in which we sold nearly $10,000 worth of sports cards. Our results indicate that stakes do indeed matter, as high-priced ($70) cards produced more of the theoretically predicted strategic behavior than did lower-priced ($3) cards. We find additional evidence consistent with the importance of cognitive costs, as subjects more experienced with sports card auctions exhibited a greater tendency to behave strategically than did less experienced bidders. Copyright 2002, Oxford University Press.

Suggested Citation

  • John A. List & David Lucking-Reiley, 2002. "Bidding Behavior and Decision Costs in Field Experiments," Economic Inquiry, Western Economic Association International, vol. 40(4), pages 611-619, October.
    • Handle: RePEc:oup:ecinqu:v:40:y:2002:i:4:p:611-619
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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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