The Bidder's Curse: Comment | Zendy

Henry S. Schneider | Zendy

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The Bidder's Curse: Comment

Author(s) -

Henry S. Schneider

Publication year - 2016

Publication title -

american economic review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 16.936

H-Index - 297

eISSN - 1944-7981

pISSN - 0002-8282

DOI - 10.1257/aer.20120767

Subject(s) - common value auction , economics , curse , winner's curse , interpretation (philosophy) , microeconomics , econometrics , mathematical economics , computer science , sociology , anthropology , programming language

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. (JEL D12, D44, D83)

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