Article ID Journal Published Year Pages File Type
7243235 Journal of Economic Behavior & Organization 2015 18 Pages PDF
Abstract
The paper models auctions with bidders who have reference dependent preferences and who may be loss averse. The endogenous reference point is defined as either the ex-ante or the interim expected price of the good, depending on whether bidders are naive or sophisticated. Equilibria with consistent reference points are shown to exist and are fully characterised. The model predicts that in equilibrium bidders both overbid and underbid in comparison to the standard risk neutral Nash equilibrium strategies.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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