Bidders Overpay in Auctions, Risk Aversion Leads to Lower Bids.
The study looked at how people bid in auctions where the highest bidder wins but pays the price of the third-highest bid. They found that bidders often bid more than what they think the item is worth, and that higher private values lead to higher bids. Having more bidders usually results in lower bids. The research also showed that being cautious can make bidders bid less than what's considered a fair price.