How Losses affect Bidding Behavior in Vickrey Auctions
We use Vickrey uniform auctions to provide an indirect robustness test of the endowment effect. Our panel data promotes two results: (1) evidence of the endowment effect exists in that risk seeking behavior following losses is less severe for 'out of pocket' losses as opposed to foregone gain. We did not find support for the prediction that bidders recoil from future losses following a realized loss (i.e., become more risk averse); and (2) a form of gamblers fallacy termed the escalation of commitment better explains bidding behavior for inexperienced bidders—risk seeking bidding behavior is observed following a loss. But as bidders gain experience the escalation of commitment is attenuated for “out of pocket” losses but not for foregone gains.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:34554. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.