The Bidder's Curse

Young Han Lee and Ulrike Malmendier

No 13699, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We employ a novel approach to identify overbidding in the field. We compare auction prices to fixed prices for the same item on the same webpage. In detailed board-game data, 42 percent of auctions exceed the simultaneous fixed price. The result replicates in a broad cross-section of auctions (48 percent). A small fraction of overbidders, 17 percent, suffices to generate the overbidding. The observed behavior is inconsistent with rational behavior, even allowing for uncertainty and switching costs, since also the expected auction price exceeds the fixed price. Limited attention to outside options is most consistent with our results.

JEL-codes: D02 D12 D44 D83 (search for similar items in EconPapers)
Date: 2007-12
New Economics Papers: this item is included in nep-gth
Note: IO LS
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Citations: View citations in EconPapers (5)

Published as Ulrike Malmendier & Young Han Lee, 2011. "The Bidder's Curse," American Economic Review, American Economic Association, vol. 101(2), pages 749-87, April.

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Journal Article: The Bidder's Curse (2011)
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