Abstract
The article presents an Internet experiment where subjects sequentially bid for basic gifts and binary-lotteries on these gifts in incentive compatible Vickrey auctions. Subjects exhibit uniformly pessimistic prize-weighting in spite of precautions to reduce suspicion and prohibit collusion. The bids for lotteries are close to the minimal payable value, even when the probability of obtaining a better prize is larger than 50%. Prize-weighting becomes even more conservative as the distance in value of payable prizes increases. The twofold aversive affect appears for three distinct groups of students; we demonstrate, however, that the same subjects overweight small win-probabilities in standard binary-choice.
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Sonsino, D. Disappointment Aversion in internet Bidding-Decisions. Theor Decis 64, 363–393 (2008). https://doi.org/10.1007/s11238-007-9055-1
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DOI: https://doi.org/10.1007/s11238-007-9055-1