Expectation, Disappointment, and Exit: Reference Point Formation in a Marketplace / Matthew Backus, Thomas Blake, Dimitriy V. Masterov, Steven Tadelis.

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Backus, Matthew

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w23022.Publication details: Cambridge, Mass. National Bureau of Economic Research 2017.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We study expectation-based reference point formation using data from an online auction marketplace. We hypothesize that exit from the marketplace is affected by disappointment from abruptly losing an auction after being the leading bidder. Expectation-based reference points that evolve over time imply that a bidder who spends more time in the lead prior to an abrupt loss will suffer a higher degree of disappointment. We find that for every additional day in the lead, bidders who lose abruptly are 6 percentage points more likely to exit. In contrast, losing bidders whose expectations are informed by early, competing bids, show no effect at all. Also, consistent with our theoretical model, more experienced bidders are less sensitive to time spent in the lead.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w23022 (Browse shelf(Opens below))	Not For Loan

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January 2017.

We study expectation-based reference point formation using data from an online auction marketplace. We hypothesize that exit from the marketplace is affected by disappointment from abruptly losing an auction after being the leading bidder. Expectation-based reference points that evolve over time imply that a bidder who spends more time in the lead prior to an abrupt loss will suffer a higher degree of disappointment. We find that for every additional day in the lead, bidders who lose abruptly are 6 percentage points more likely to exit. In contrast, losing bidders whose expectations are informed by early, competing bids, show no effect at all. Also, consistent with our theoretical model, more experienced bidders are less sensitive to time spent in the lead.