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

  • Bramsen, Jens-Martin

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.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14815.

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Date of creation: Jun 2008
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Handle: RePEc:pra:mprapa:14815
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  1. Graham Loomes & Chris Starmer & Robert Sugden, 2003. "Do Anomalies Disappear in Repeated Markets?," Economic Journal, Royal Economic Society, vol. 113(486), pages C153-C166, March.
  2. Bramsen, Jens-Martin, 2008. "A pseudo-endowment effect in internet auctions," MPRA Paper 14813, University Library of Munich, Germany.
  3. Jacinto Braga & Steven Humphrey & Chris Starmer, 2006. "Market Experience Eliminates Some Anomalies – And Creates New Ones," Discussion Papers 2006-19, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  4. Garratt, Rod & Wooders, John, 2004. "Efficiency in Second-Price Auctions: A New Look at Old Data," University of California at Santa Barbara, Economics Working Paper Series qt5d86p46d, Department of Economics, UC Santa Barbara.
  5. John A. List, 2003. "Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace," NBER Working Papers 9736, National Bureau of Economic Research, Inc.
  6. John List, 2003. "Does market experience eliminate market anomalies?," Natural Field Experiments 00297, The Field Experiments Website.
  7. Patrick Bajari & Ali Hortaçsu, 2004. "Economic Insights from Internet Auctions," Journal of Economic Literature, American Economic Association, vol. 42(2), pages 457-486, June.
  8. John List & Michael Haigh, 2005. "Do professional traders exhibit myopic loss aversion? An experimental analysis," Artefactual Field Experiments 00052, The Field Experiments Website.
  9. Livingston, 2010. "The Behavior Of Inexperienced Bidders In Internet Auctions," Economic Inquiry, Western Economic Association International, vol. 48(2), pages 237-253, 04.
  10. Bramsen, Jens-Martin, 2008. "Bid early and get it cheap - Timing effects in Internet auctions," MPRA Paper 14811, University Library of Munich, Germany.
  11. Axel Ockenfels & Alvin E. Roth, 2001. "The Timing of Bids in Internet Auctions: Market Design, Bidder Behavior, and Artificial Agents," Papers on Strategic Interaction 2002-33, Max Planck Institute of Economics, Strategic Interaction Group.
  12. Ockenfels, Axel & Roth, Alvin E., 2006. "Late and multiple bidding in second price Internet auctions: Theory and evidence concerning different rules for ending an auction," Games and Economic Behavior, Elsevier, vol. 55(2), pages 297-320, May.
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