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Learning to bid, but not to quit – Experience and Internet auctions

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  • Bramsen, Jens-Martin

Abstract

A classic argument in economics is that experience in the market place will eliminate mistakes and cognitive biases. Internet auctions are a popular market were some bidders gather extensive experience. In a unique data set from a Scandinavian auction site I question if and what bidders learn. At face value experienced bidders do adapt better bidding strategies. However, the so-called pseudo-endowment effect does not disappear. Regardless of their experience, bidders will be inclined to increase their willingness to pay as a response to having had “ownership” (the leading bid) before being outbid. Thus, this data can confirm that feedback, and especially negative feedback, seems to be a critical component in learning.

Suggested Citation

  • Bramsen, Jens-Martin, 2008. "Learning to bid, but not to quit – Experience and Internet auctions," MPRA Paper 14815, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:14815
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    References listed on IDEAS

    as
    1. Jeffrey A. Livingston, 2010. "The Behavior Of Inexperienced Bidders In Internet Auctions," Economic Inquiry, Western Economic Association International, vol. 48(2), pages 237-253, April.
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    7. John A. List, 2003. "Does Market Experience Eliminate Market Anomalies?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 41-71.
    8. Braga, Jacinto & Humphrey, Steven J. & Starmer, Chris, 2009. "Market experience eliminates some anomalies--and creates new ones," European Economic Review, Elsevier, vol. 53(4), pages 401-416, May.
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    More about this item

    Keywords

    Experience; Learning; Internet auctions; Reference-Dependent Preferences; Endowment Effect; Bidding behavior; eBay.;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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