Individuals’ deviations from optimality predictions in auction theory thus fit a more general account that involves

an evolved, and thus adaptive, psychological state in humans where social cues are weighted strongly in decision-making (Perreault et al., 2012 and Toelch et al., 2013). The balance between social and personal information is then established through trial and error learning (Behrens et al., 2008 and Richerson learn more and Boyd, 2004). Common value auctions, for example, demand a reliance on individual information (estimated price and estimation error) and a neglect of competitors’ bids to bid optimally. It is thus possible that some auction experiments create environments where our proclivity to harvest social information leads to suboptimal decisions as seen in overbidding. Several explanations have been proposed to explain overbidding in all-pay auctions (Sheremeta, 2013). Bounded rationality for example predicts that competitors increase overbidding with higher endowment. While it is possible that our per round endowment of seven Euro influenced overall overbidding rates, this explanation is not sufficient to explain the within player differences because endowments were equal across items respectively preferences. The utility of winning, as mentioned above, is also a possible cause for overbidding. While we cannot fully exclude this possibility, GSK-3 inhibitor overbidding is happening rarely in the low preference condition. Here, only few players

increase their bids over the course of the experiment. If winning an item yielded a higher utility, we again would expect similar effects across preference levels. The two aforementioned

effects could potentially scale with the initial preference of the player resulting in stronger effects for high preference items. Another alternative proposed in the literature Methocarbamol is the escalation of commitment (Staw, 1981) where competitors once committed to an action will increase their investment. The social dynamics observed in our experiment could strengthen the escalation, particular if the two competitors have similar private value estimates (as in the PV± condition) and start overbidding each other. The escalation of commitment led to sunk costs for both players, which in turn reduced the propensity of a competitor to change their preference. Further investigations in this issue will reveal how exactly sunk costs and escalation of commitment interact with preferences. In conclusion, our results highlight the fact that private value estimates of others, revealed through competitive interactions, contribute significantly in establishing one’s own true preferences. As preferences change frequently in our experiment, a major question that arises is how lasting these newly established preferences are. Uncovering how competitive interactions modulate general preferences, not only for single items, can further aid our understanding of human preference formation. This work was supported by the Einstein Foundation.