Loss Aversion in Storage Locker Auctions

Abstract

I find that loss averse bidders bid noticeably below risk neutral ones in a novel tractable structural model for ascending auctions with both common and private value components as well as heterogenous bidders' characteristics. Moreover, I assess the empirical relevance of the model using data from storage locker auctions in the popular cable TV show Storage Wars, documenting for the first time the presence of loss aversion in actual ascending auctions. Additionally, I find that bidders reduce their bids even further when they incorporate the information of those bidders present who decide not to participate after inspecting the item auctioned.