Impressum |  Kontakt 
Siegel der Universität

Universität zu Köln
Wirtschafts- und Sozialwissenschaftliche Fakultät

Staatswissenschaftliches Seminar - Prof. Schmitz

Auctions with Anticipated Emotions: Overbidding, Underbidding, and Optimal Reserve Prices

Andreas Roider and Patrick W. Schmitz

Scandinavian Journal of Economics, Vol. 114 (3), 2012, 808–830.

Abstract. The experimental literature has documented that there is overbidding in second-price auctions, regardless of bidders' valuations. In contrast, in first-price auctions there tends to be overbidding for large valuations, but underbidding for small valuations. We show that the experimental evidence can be explained by a simple extension of the standard auction model, where bidders anticipate positive or negative emotions caused by the mere fact of winning or losing. Even if the "emotional" (dis-)utility is very small, the seller's optimal reserve price r* may be significantly different from the standard model. Moreover, r* is decreasing in the number of bidders.

The working paper version is available for download (CEPR Discussion Paper 6476).

The paper is available for download.