Auctions can be as addictive as gambling.  If you’ve ever been caught up in a bidding frenzy, and then paid too much for an item, you know what I mean. Auctioneers love it.  E-bay loves it.  They keep the frenzied pace up, and watch their profits grow.

Until recently, economics behaviorists could only theorize why people repeatedly overbid at auctions.  They thought it might be risk aversion, or the joy of winning.

But now neuropsychologists are taking the new science of brain imagery and mapping the neurocircuits of bidders during the bidding process.

The study, published in the September 26th issue of Science, involved monitoring  patterns of brain activation while people were bidding, using a new technology called functional magnetic resonance (fMRI) .  These patterns were compared to those brain patterns of people playing a lottery game.  In both games you could win money, but the auction bidding was competitive, while the lottery game was not.

“An examination of activation in the striatum, part of the brain’s reward circuitry, showed the primary difference when winning or losing in the auction vs. lottery games was an exaggerated response to losses in the auction game. The magnitude of this exaggerated loss response in the striatum during the auction game correlated with the tendency to overbid, suggesting the intriguing hypothesis that perhaps the prospect of losing the social competition inherent in an auction may lead people to bid “too high.”

Other follow-up experiments, using more standardized types of economic analysis, confirmed that it isn’t either risk aversion, or the joy of winning, which stimulates brain circuitry during the over bidding process, but the fear of losing in a competitive social situation.

What does this mean to you?

Being aware of “the need to win” while bidding in an auction is the first step in maintaining control during the bidding process.  Keep this in mind as you raise your hand to the auctioneer’s frenzied prodding for a higher bid, or enter that bid on e-bay.  Is the item worth it?  If you’re unsure, refrain.

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