Dataset Information

Competition strength influences individual preferences in an auction game.

ABSTRACT: Competitive interactions between individuals are ubiquitous in human societies. Auctions represent an institutionalized context for these interactions, a context where individuals frequently make non-optimal decisions. In particular, competition in auctions can lead to overbidding, resulting in the so-called winner's curse, often explained by invoking emotional arousal. In this study, we investigated an alternative possibility, namely that competitors' bids are construed as a source of information about the good's common value thereby influencing an individuals' private value estimate. We tested this hypothesis by asking participants to bid in a repeated all-pay auction game for five different real items. Crucially, participants had to rank the auction items for their preference before and after the experiment. We observed a clear relation between auction dynamics and preference change. We found that low competition reduced preference while high competition increased preference. Our findings support a view that competitors' bids in auction games are perceived as valid social signal for the common value of an item. We suggest that this influence of social information constitutes a major cause for the frequently observed deviations from optimality in auctions.

SUBMITTER: Toelch U

PROVIDER: S-EPMC4175410 | biostudies-literature | 2014 Nov

REPOSITORIES: biostudies-literature

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Competition strength influences individual preferences in an auction game.

Toelch Ulf U Jubera-Garcia Esperanza E Kurth-Nelson Zeb Z Dolan Raymond J RJ

Cognition 20140828 2

Competitive interactions between individuals are ubiquitous in human societies. Auctions represent an institutionalized context for these interactions, a context where individuals frequently make non-optimal decisions. In particular, competition in auctions can lead to overbidding, resulting in the so-called winner's curse, often explained by invoking emotional arousal. In this study, we investigated an alternative possibility, namely that competitors' bids are construed as a source of informati ...[more]

PMID: 25168161

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Project description:Preference for beauty is human nature, as previous behavior studies have supported the notion of "beauty premium" in which attractive people were more easily to get promoted and receive higher salaries. In the present study, 29 males were recruited to participate in a three-person ultimatum game (UG) including a proposer, a responder and a powerless third player. Each subject, playing as the responder, had to decide whether to accept an offer from the allocator both for himself and a female third person. We aimed to elucidate how the facial attractiveness of the female subject affected the male subjects' fairness and decision-making in social exchanges. Frontal feedback-related negativity (FRN) in response to four offers in an attractive-face condition revealed no significant differences between offers; however, when the companion was an unattractive female, an "unfair/fair" offer, which assigned a lower share to the responder and a fair share to the third player, elicited the largest FRN. Furthermore, when the third player was offered the smallest amount ("fair/unfair" offer), a larger FRN was generated in an attractive-face condition than unattractive-face condition. In the "unfair/fair" offer condition in which subjects received a smaller allocation than the third person, the beauty of their female counterparts attenuated subjects' aversion to inequality, resulting in a less negative FRN in the frontal region and an increased acceptance ratio. However, the influence of the third player's facial attractiveness only affected the early evaluation stage: late P300 was found to be immune to the "beauty premium". Under the two face conditions, P300 was smallest following an "unfair/fair" offer, whereas the amplitudes in the other three offer conditions exhibited no significant differences. In addition, the differentiated neural features of processing facial attractiveness were also determined and indexed by four event-related potentials (ERP) components: N170, frontal N1, N2 and late positive potentials (LPPs).

Dataset Information

Competition strength influences individual preferences in an auction game.

Publications

Competition strength influences individual preferences in an auction game.

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