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December 2, 2007

Stupid Human Tricks

As I mentioned in a previous post, a colleague of my wife's (a psychologist) described an experiment where a 10 dollar note was put up for auction. It was bid slightly higher than $10, demonstrating some irrational consumer behavior. I haven't been able to locate a citation for the experiment and decided to toss $5 in to see if this could actually be true. Obviously, this experiment is designed to:

a. lose money
b. (potentially) make me look stupid

Never being afraid of the latter in the name of experimentation, I didn't hesitate. Listing fees for the $5 auction were 10¢ and I'll pay about 3% of $5 for the final sale. I set shipping at 45¢. Lots at stake. Here goes.

NOTE: this widget will self-destruct in 90 days

The auction is HERE. Bookmark it and stay tuned. Should be fun.

Addendum: My wife informed me the phenomena is known as Sunken Cost. Some economic thing. I've read the entry a couple times, but don't quite understand it yet. As of day 1 of the listing, I'm out about 22¢ for listing and sale fees but have broken even on face value. I defrayed some of the loss by padding the shipping by 3¢, heh, heh, heh.

OOPS: A co-worker provided me with a description of the experiment called the The Dollar Auction. I got it completely wrong. It'll still be kind of fun to see how this winds down, but The Dollar Auction is fascinating reading.

Update: It sold for $4.79 + $0.45 = $5.24 (minus $0.42 to ship). During this time, I also noticed quite a few gift cards selling for a few percent above face value. How bizarre.

See also Escalation of Commitment for another interesting read.

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