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Contribution Details

Type Journal Article
Scope Discipline-based scholarship
Title The Bidder’s Curse
Organization Unit
Authors
  • Ulrike Malmendier
  • Han Lee Young
Item Subtype Original Work
Refereed Yes
Status Published in final form
Language
  • English
Journal Title American Economic Review
Publisher American Economic Association
Geographical Reach international
ISSN 0002-8282
Volume 101
Number 2
Page Range 749 - 787
Date 2011
Abstract Text We employ a novel approach to identify overbidding in auctions. We compare online auction prices to fixed prices for the same item on the same webpage. In detailed data on auctions of a board game, 42 percent of auctions exceed the simultaneous fixed price. The result replicates in a broad cross-section of auctions (48 percent overbidding). A small fraction of overbidders, 17 percent of bidders, suffices to generate the large fraction of auctions with overbidding. We show that the observed behavior is inconsistent with rational behavior, even allowing for uncertainty about prices and switching costs, since the expected auction price also exceeds the fixed price. Limited attention best explains our results.
Free access at DOI
Digital Object Identifier 10.1257/aer.101.2.749
Other Identification Number merlin-id:5943
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Additional Information Copyright American Economic Association; reproduced with permission