IDEAS home Printed from https://ideas.repec.org/a/oup/jeurec/v20y2022i1p116-149..html
   My bibliography  Save this article

Expectation, Disappointment, and Exit: Evidence on Reference Point Formation from an Online Marketplace

Author

Listed:
  • Matthew Backus
  • Thomas Blake
  • Dimitriy Masterov
  • Steven Tadelis

Abstract

We study disappointment and platform exit among new bidders in an online auction marketplace. In particular, we study a hybrid auction format with a “Buy-It-Now” option, which, when executed, will abruptly end the auction and cancel any standing bids. When this happens, if the formerly leading bidder is new to the platform, then they are 6 percentage points more likely to exit the marketplace for every additional day they spent in the lead. This is rationalized by disappointment-averse bidders with outside options and rational expectations about the likelihood of winning. Our explanation is validated by three ancillary predictions: when expectations are lowered by higher competing bids, there is no effect; sensitivity of exit is declining in prior experience; and, for bidders who do not exit, time in the lead during the first experience predicts a subsequent preference for fixed-price, rather than auction, listings.

Suggested Citation

  • Matthew Backus & Thomas Blake & Dimitriy Masterov & Steven Tadelis, 2022. "Expectation, Disappointment, and Exit: Evidence on Reference Point Formation from an Online Marketplace," Journal of the European Economic Association, European Economic Association, vol. 20(1), pages 116-149.
    • Handle: RePEc:oup:jeurec:v:20:y:2022:i:1:p:116-149.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/jeea/jvab033
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

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

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Adhvaryu, Achyuta & Nyshadham, Anant & Xu, Huayu, 2023. "Hostel takeover: Living conditions, reference dependence, and the well-being of migrant workers," Journal of Public Economics, Elsevier, vol. 226(C).
    2. Gagnon-Bartsch, Tristan & Bushong, Benjamin, 2022. "Learning with misattribution of reference dependence," Journal of Economic Theory, Elsevier, vol. 203(C).

    More about this item

    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:oup:jeurec:v:20:y:2022:i:1:p:116-149.. 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: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/jeea .

    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.