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Bidding Behavior and Decision Costs in Field Experiments

  • John A. List
  • David Lucking-Reiley

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.

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Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 40 (2002)
Issue (Month): 4 (October)
Pages: 611-619

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Handle: RePEc:oup:ecinqu:v:40:y:2002:i:4:p:611-619
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  1. John List, 2001. "Do explicit warnings eliminate the hypothetical bias in elicitation procedures? Evidence from field auctions for sportscards," Framed Field Experiments 00163, The Field Experiments Website.
  2. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-31, July.
  3. Tenorio, Rafael, 1997. "On Strategic Quantity Bidding in Multiple Unit Auctions," Journal of Industrial Economics, Wiley Blackwell, vol. 45(2), pages 207-17, June.
  4. Noussair, Charles, 1995. "Equilibria in a Multi-object Uniform Price Sealed Bid Auction with Multi-unit Demands," Economic Theory, Springer, vol. 5(2), pages 337-51, March.
  5. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, 03.
  6. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
  7. List, John A & Shogren, Jason F, 1998. "The Deadweight Loss of Christmas: Comment," American Economic Review, American Economic Association, vol. 88(5), pages 1350-55, December.
  8. David Lucking-Reiley & John A. List, 2000. "Demand Reduction in Multiunit Auctions: Evidence from a Sportscard Field Experiment," American Economic Review, American Economic Association, vol. 90(4), pages 961-972, September.
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