Testing for Nonstandard Behavior in Auctions in the Presence of Unobserved Demand
Empirical work on auctions has found that bidders deviate from rational behavior under standard preferences in important ways. In the current paper, we investigate a range of these behaviors, including nonrational herding, auction fever, quasi-endowment effect, escalation of commitment, and irrational limited attention. Our innovations are to use new data from a field experiment on eBay and to examine the identifying assumptions of tests used in previous work. With these innovations, we now find that there is currently only limited evidence that bidders deviate from standard behavior in the field.
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