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Endowment effect, on-line auctions, bidding
The wide adoption of dynamic second-price auctions as the format of choice for Internet-based (online) transactions has created an interest in understanding how individuals behave in such environments. The current work concentrates on two dynamic effects, which we call quasi-endowment and opponent effect, and finds that these effects may result in over-bidding. The results of two experimental auctions – one involving hypothetical bids and the other real-money bids – demonstrate that bids reflect valuations that include the non-normative influences of the two factors. Quasi-endowment and opponent effects could lead to the behaviors of repeated bidding and sniping commonly observed in second-price online auctions such as eBay.
Journal of Interactive Marketing