Getting Carried Away in Auctions as Imperfect Value Discovery

Eric Rasmusen ()

No 2007-05, Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy

Abstract: Bidders in auctions must decide whether and when to incur the cost of estimating the most they are willing to pay. 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.

Date: 2007
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Related works:
Working Paper: Getting Carried Away in Auctions as Imperfect Value Discovery (2004)
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