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To Win An Auction: Psychological Factors Matter Too

In class we have discussed about what to do to maximize payoff in auctions. According to different types of auctions, people should take different dominant strategies to make their profits maximal. However, during real auctions, people do not only analyze everything rationally and calmly; they sometimes get distracted by adrenaline and irrationalness.

In Place Your Bids, the author has pointed out some phenomenon occurred that bidders are doing something theoretically not beneficial to their stands. Although economically bidders want to avoid high-traffic auctions, so that with the market-clearing prices and everyone gets what he wants, actually psychologically bidders are lured by high traffic. Bidders are trying to “follow the crowd”; they tend to be attracted by auctions with more bidders because they think the other bidders must have shared some information that they don’t know so that those auctions are that popular. Meanwhile, completely rational bidders are supposed to quit the auction if they find out they are no longer possible to make profits, no matter how long they have been in the auction already. However, real bidders tend to get stuck with the auctions that they have invested time and resource to. It also relates to the economical concept “sunk cost” too. Those kinds of phenomenon explain the existence of “action fever”. BBC Column: Auction Psychology has illustrated this as when people are in social occasions with crowds around, this tends to increase individuals’ psychological arousal because of social facilitation effect, and make individuals do some irrational decisions.

Taking mysterious psychological factors and easily arousing over-excitement into consideration, real auctions are not only simple theoretical analysis. In order to win an auction in reality, there is much to explore.






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