Understanding Overbidding: Using the Neural Circuitry of Reward to Design Economic Auctions
Mauricio R. Delgado, Andrew Schotter, Erkut Ozbay, and Elizabeth A. Phelps ,
5897
( 321 )
Science
1849-1852
September
2008
Abstract

We take advantage of our knowledge of the neural circuitry of reward to investigate a puzzling economic phenomenon: Why do people overbid in auctions? Using functional magnetic resonance imaging (fMRI), we observed that the social competition inherent in an auction results in a more pronounced blood oxygen level–dependent (BOLD) response to loss in the striatum, with greater overbidding correlated with the magnitude of this response.

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