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Full-Text Articles in Behavioral Economics
The Bidder's Curse: Comment, Henry S. Schneider
The Bidder's Curse: Comment, Henry S. Schneider
Henry S Schneider
The prices of auctions on eBay often exceed eBay’s fixed-price “Buy-It-Now” prices. I investigate the causes of this overbidding, focusing on the interpretation in Malmendier and Lee (2011) that the observed overbidding cannot be explained “without allowing for nonstandard preferences or beliefs” and that the “strongest direct evidence points to limited attention.” Using data from their study and new data from eBay, I provide evidence that a key condition for identifying nonstandard behavior may not have been met, and that the observed overbidding is not inconsistent with standard behavior once we allow for the likely presence of search costs.
Limited Rationality And Convergence To Equilibrium Play, Kristen Cooper, Henry S. Schneider, Michael Waldman
Limited Rationality And Convergence To Equilibrium Play, Kristen Cooper, Henry S. Schneider, Michael Waldman
Henry S Schneider
The psychology and behavioral economics literatures show that real world decision making at the individual level is frequently inconsistent with the rational actor model. An important question is therefore the extent to which a proportion of agents who make mistakes affects market level outcomes. Previous theoretical and experimental research showed that market level outcomes are less likely to match the rational actor model in settings characterized by strategic complementarity and more likely in settings characterized by strategic substitutability. We extend this research both theoretically and experimentally by introducing important real world complications – specifically, periodic shocks to the payoff structure …
Nonstandard Bidder Behavior In Real-World Auctions, Joseph U. Podwol, Henry S. Schneider
Nonstandard Bidder Behavior In Real-World Auctions, Joseph U. Podwol, Henry S. Schneider
Henry S Schneider
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 …