Whether rationality of economic behavior increases with expected payoffs
and decreases with the cognitive cost it takes to formulate an optimal strategy
remains an open question. We explore these issues with field data, using
individual bids from sealed-bid auctions in which we sold nearly $10,000
worth of sportscards. Our results indicate that stakes do indeed matter,
as high-priced ($70) cards produced more of the theoretically predicted
strategic behavior than did lower-priced ($3) cards. We find additional
evidence consistent with the importance of cognitive costs, as subjects
more experienced with sportscard auctions exhibited a greater tendency to
behave strategically than did less experienced bidders.
Last revised: March 2000
Return to David Lucking-Reiley's Curriculum Vitae