IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v141y2024ics0264999324002396.html
   My bibliography  Save this article

Dutch auction dynamics in non-fungible token (NFT) markets

Author

Listed:
  • Shannon, Darren
  • Dowling, Michael
  • Zhaf, Marjan
  • Sheehan, Barry

Abstract

Non-fungible tokens (NFTs) rose to prominence as a wide-scale implementation of blockchain technology to support the emergence of crypto-asset markets. These nascent digital markets raise questions about the behaviours of investors in the digital economy and their appetite for risk. Using 28,919 auction listings, 4937 sales, and 30,197 Telegram messages, we conduct a field study on the bidding and selling behaviours of NFT investors in a Dutch auction system. We reveal risk-seeking behaviours in our sample of Dutch auction sales. We document that time pressures and value propositions significantly influence NFT investors: fast clock speeds and greater price separations induce underbidding behaviours and are associated with low value retention for sellers. These results are confirmed using a matched-pairs analysis. Our study raises further questions on the risk preferences of investors in emergent digital marketplaces. We propose value maximisation strategies for marketplace developers and participants, while drawing attention to the presence of potentially exploitable biases and heuristics amongst participants, courtesy of bidding incentivisation schemes significantly altering how investors value NFTs.

Suggested Citation

  • Shannon, Darren & Dowling, Michael & Zhaf, Marjan & Sheehan, Barry, 2024. "Dutch auction dynamics in non-fungible token (NFT) markets," Economic Modelling, Elsevier, vol. 141(C).
    • Handle: RePEc:eee:ecmode:v:141:y:2024:i:c:s0264999324002396
    DOI: 10.1016/j.econmod.2024.106882
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999324002396
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econmod.2024.106882?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    NFTs; Dutch auctions; Behavioural Finance; Digital economy; Sentiment analysis; Wash trading;
    All these keywords.

    JEL classification:

    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • G00 - Financial Economics - - General - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:141:y:2024:i:c:s0264999324002396. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.