Seminar by Antonio Rosato
Loss Aversion and Competition in Vickrey Auctions: Money Ain't No Good
Seminar by Antonio Rosato, University of Technology Sidney
A key prediction of expectations-based reference-dependent preferences and loss aversion in second-price auctions with private values is that the number of bidders should affect bids in auctions for real objects but not in auctions with induced monetary values.
In order to test this distinctive comparative statics prediction, we develop an experiment where subjects bid in multiple auctions for real objects as well as auctions with induced values, each time facing a different number of rivals. Our results are consistent with expectations-based reference-dependent preferences and loss aversion. We nd that in real-object auctions bids decline with the intensity of competition whereas in induced-value auctions, instead, bids do not vary with the intensity of competition.
These ndings suggest that bidders may behave differently in real-object auctions vs. induced-value ones and that a seller auctioning off a consumption good in the eld may
not necessarily benet from fostering competition.