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Getting Carried Away in Auctions as Imperfect Value Discovery

  • Eric Rasmusen

    (Indiana University)

Bidders have to decide whether and when to incur the cost of estimating their own values in auctions. This can explain why people seem to get carried away, bidding higher than they had planned before the auction and then finding they had paid more than the object was worth to them. Even when such behavior is rational, ex ante, it may be perceived as irrational if one ignores other situations in which people revise their bid ceilings upwards and are happy when that enables them to win the auction.

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Paper provided by EconWPA in its series Industrial Organization with number 0409001.

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Length: 30 pages
Date of creation: 04 Sep 2004
Date of revision:
Handle: RePEc:wpa:wuwpio:0409001
Note: Type of Document - pdf; pages: 30
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  1. Alvin E. Roth & Axel Ockenfels, 2002. "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," American Economic Review, American Economic Association, vol. 92(4), pages 1093-1103, September.
  2. Nicola Persico, 2000. "Information Acquisition in Auctions," Econometrica, Econometric Society, vol. 68(1), pages 135-148, January.
  3. Paul Klemperer & Jeremy Bulow, 1998. "Prices and the Winners Curse," Economics Series Working Papers 1998-W02, University of Oxford, Department of Economics.
  4. Eric Rasmusen, 2004. "Strategic Implications of Uncertainty Over One’s Own Private Value in Auctions," Working Papers 2004-13, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  5. Eric Rasmusen, 2004. "When Does Extra Risk Strictly Increase the Value of Options?," Finance 0409004, EconWPA.
  6. Rasmusen Eric Bennett, 2001. "Explaining Incomplete Contracts as the Result of Contract-Reading Costs," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 1(1), pages 1-39, October.
  7. John Asker, 2000. "Bidding up, buying out and cooling-off: an examination of auctions with withdrawal rights," Economic Theory, Springer, vol. 16(3), pages 585-611.
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