6

From an empirical point of view, Augenblick (forthcoming), Hinnosaar (2014), and Platt, Price, and Tappen (2013) documented actual profits that are, on average, considerably larger than those that theory would predict. Augenblick (forthcoming) rationalized this inconsistency by assuming that bidders may suffer from the sunk-cost fallacy. Platt, Price, and Tappen (2013) postulated instead that bidders may be risk lovers rather than risk neutral. Finally, Gnutzmann (2014) provided an additional explanation based on prospect theory.