Brain imaging study provides new insight into why people pay too much in auctions

Auctions are an old and widely used method for allocating goods that have become increasingly common with the advent of internet auctions sites such as Ebay. Previous economic research has shown that in an auction people tend to bid "too high," or overbid, given the value of the item for sale. By combining brain imaging techniques with behavioral economic research, neuroscientists and economists at New York University were able to provide new insight into this tendency to overbid. Specifically, they show that the fear of losing the social competition inherent in an auction may, in part, cause people to pay too much. The research, which suggests an expanded role for neuroscience in understanding economic behavior, appears in the latest issue of the journal Science.

Read the whole article on Physorg

More from Physorg

Related