[The following is an exact transcript of this podcast.]
If you’ve ever gotten sucked into a bidding war on eBay, you know the feeling. With one minute left in the auction, the bidding is fast and furious as everyone tries to come out on top. Higher and higher you up the ante, each click of the mouse a painful reminder that you’ve already bid more than you wanted to spend. But why do we do that: overbid at public auctions? Now a team of neuroscientists says that, rather than the joy of winning, it’s an aversion to losing that drives such economic misbehavior.
In one experiment, the scientists set up a series of auctions. They told half the subjects that they would start the auction with a $15 bonus, which they got to keep if they won. The other subjects were told that, when the auction was done, if they won they’d get an extra 15 bucks. Either way, the winners would get the same bonus. But the researchers found that people bid more when they were afraid they might lose the money they already had, results that appear in the September 26th issue of Science. Of course, it could also be that people get possessive when they have money in their pockets, even if it’s just a fake $15 that you can’t even use to buy an experimental cup of coffee.