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Behavioral biases in auctions: an experimental study

Author

Listed:
  • Anna Dodonova

    (University of Ottawa)

  • Yuri Khoroshilov

    (University of Ottawa)

Abstract

This paper investigates implications of some of the well-known behavioral biases of bidders' behavior in different types of auctions. It presents the results of an experimental study that tests the endowment hypothesis for English auctions and regret aversion hypothesis for first-price sealed-bid auctions. This study documents support for the former and no support for the latter hypotheses.

Suggested Citation

  • Anna Dodonova & Yuri Khoroshilov, 2009. "Behavioral biases in auctions: an experimental study," Economics Bulletin, AccessEcon, vol. 29(3), pages 2218-2226.
    • Handle: RePEc:ebl:ecbull:eb-09-00444
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    File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I3-P67.pdf
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    References listed on IDEAS

    as
    1. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    2. Richard H. Thaler, 2008. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 27(1), pages 15-25, 01-02.
    3. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    4. Samuelson, William & Zeckhauser, Richard, 1988. "Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
    5. Richard Engelbrecht-Wiggans, 1989. "The Effect of Regret on Optimal Bidding in Auctions," Management Science, INFORMS, vol. 35(6), pages 685-692, June.
    6. David E. Bell, 1982. "Regret in Decision Making under Uncertainty," Operations Research, INFORMS, vol. 30(5), pages 961-981, October.
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    Citations

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    Cited by:

    1. Martín Jorge Egozcue, 2012. "Gains from diversification: a regret theory approach," Economics Bulletin, AccessEcon, vol. 32(1), pages 204-219.
    2. Nicola Lacetera & Bradley J. Larsen & Devin G. Pope & Justin R. Sydnor, 2016. "Bid Takers or Market Makers? The Effect of Auctioneers on Auction Outcome," American Economic Journal: Microeconomics, American Economic Association, vol. 8(4), pages 195-229, November.
    3. Ninoslav Malekovic & Lazaros Goutas & Juliana Sutanto & Dennis Galletta, 2020. "Regret under different auction designs: the case of English and Dutch auctions," Electronic Markets, Springer;IIM University of St. Gallen, vol. 30(1), pages 151-161, March.

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    More about this item

    Keywords

    auction; regret; endowment effect; loss aversion; behavioral economics;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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