Getting Carried Away in Auctions as Imperfect Value Discovery
Eric Bennett Rasmusen
Indiana University Bloomington - Department of Business Economics & Public Policy
June 6, 2004
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.
Number of Pages in PDF File: 20
Keywords: Auctions, private-value, psychological, behavioral economics, information
JEL Classification: d44, d83working papers series
Date posted: July 20, 2002
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