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Emotions and Economic Shocks in a First-Price Auction

Ronald Bosman () and Arno Riedl
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Ronald Bosman: De Nederlandsche Bank

No 03-056/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We investigate experimentally whether emotions affect bidding behavior in a firstprice auction. To induce emotions, we confront subjects after a first auction series with apositive or negative random economic shock. We then explore the relation between emotions andbidding behavior in a second auction series. Our main results are: (i) the economic shock has asubstantial impact on the experienced emotions of bidders; (ii) the emotional statesystematically influences bidding behavior. In particular, negative emotions induce morecompetitive bidding. Our findings show that for a good understanding of bidder behavior theemotions have to be taken into account.

Keywords: auction; economic shock; emotion; experiment. (search for similar items in EconPapers)
JEL-codes: A12 C72 C91 C92 (search for similar items in EconPapers)
Date: 2003-06-19
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