The Sunk-Cost Fallacy in Penny Auctions

• 成果类型: Article
• 署名作者: Augenblick, Ned
• 署名单位: University of California System; University of California Berkeley
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdv037
• 发表日期: 2016
• 页码: 58-86
• 关键词: economics; PSYCHOLOGY; escalation; attrition; field; WAR

摘要

This article theoretically and empirically analyses behaviour in penny auctions, a relatively new auction mechanism. As in the US dollars or war-of-attrition, players in penny auctions commit higher non-refundable costs as the auction continues and only win if all other players stop bidding. I first show that, in any equilibria that does not end immediately, players bid probabilistically such that the expected profit from every bid is zero. Then, using two large data sets covering 166,000 auctions, I calculate that average profit margins actually exceed 50%. To explain this deviation, I incorporate a sunk-cost fallacy into the theoretical model to generate a set of predictions about hazard rates and player behaviour, which I confirm empirically. While players do (slowly) learn to correct this bias and there are few obvious barriers to competition, activity in the market is rising and concentration remains relatively high.