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Nonstandard bidder behavior in real-world auctions

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  • Podwol, Joseph Uri
  • Schneider, Henry S.

Abstract

Empirical work on auctions has found that bidders deviate from standard behavior in important ways. We investigate a range of these behaviors, including nonrational herding, auction fever, quasi-endowment effect, and escalation of commitment. Our innovations are to more completely control for unobservables by using new data from a field experiment on eBay, and by accounting for censoring of bids below the starting price. Consistent with standard auction theory and in contrast to the predictions of the nonstandard behaviors, we find that auction starting price has no effect on bidder willingness to pay in a private-values setting. We conclude that there is little evidence that these nonstandard behaviors are important in the field.

Suggested Citation

  • Podwol, Joseph Uri & Schneider, Henry S., 2016. "Nonstandard bidder behavior in real-world auctions," European Economic Review, Elsevier, vol. 83(C), pages 198-212.
    • Handle: RePEc:eee:eecrev:v:83:y:2016:i:c:p:198-212
    DOI: 10.1016/j.euroecorev.2015.12.012
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    References listed on IDEAS

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    More about this item

    Keywords

    Auctions; Nonstandard behavior; Experiment;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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