Online bidders can be spiteful - study
A new study co-authored by Simon Fraser University economics professor Erik Kimbrough set out to show why people overbid in online auctions – instead, it discovered a way to measure spitefulness through online bidding.
“We were trying to explain overbidding in auctions relative to a simultaneously available fixed-price option - like a Buy-It-Now price on eBay. We happened on the spitefulness data sort of by accident,” says Kimbrough.
Kimbrough and co-author Philipp Reiss found that some of their subjects would intentionally drive up prices when given the opportunity, with no cost to themselves.
“In our auctions, the winner is the person who submits the highest bid, but they have to pay a price equal to the second-highest bid. This "second price auction" is basically a simplified version of how eBay runs its auctions,” he explains.
“Our innovation was to create second-price auctions that have two stages of bidding. All the bidders submit an initial bid, and then before the final bids are submitted, we informed everyone of the current highest bid,” he says.
“People could see what bid was currently winning, and, knowing that the price was determined by the second highest bid, they could increase their bid, without going over the current high bid, in order to raise the price paid by the winner.”
What their research eventually found is that people show consistent levels of spite over time—they’re either completely spiteful or not at all—with no middle ground.
“The honest answer is, I don't know [why our experiment showed such polarized extremes],” he says, adding some of the spiteful bidders claim they had been trying to “punish” others for bidding too high or to teach them a lesson.
“We now have a good way of measuring the extent of someone's spitefulness,” says Kimbrough. “To what end this measurement is used remains to be determined, but I hope that future work will explore how spitefulness is related to other important behaviors, and how sensitive it is to things like context, information about the others you are harming, and so on.”
The full study is available online from PLoS ONE.
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