Psychology researchers have suggested fear of losing drives up auction prices, not more “rational” economic principles. So the next time you sense you’re overbidding on eBay, you probably are, not due to any theoretical “price the market will bear,” but instead due to some competitive wiring in your brain that says win at all costs. 
It’s likely a survival mechanism—most brain quirks are—remaining intact long after we removed ourselves from the harsh, bloody realities of the natural world and replaced them with theoretic constructs.*
The study was a small one, involving just 15 people given imagery dollars for participating in auctions and lotteries. Using functional magnetic resonance imaging (fMRI), scientists monitored brain activity, particularly the striata, the brain’s reward center, as the subjects carried out these scenarios. The brain scans showed the same mechanisms at work when winning either an auction or a lottery.
Losing, though, was where the key differences were. Losing a lottery was no big deal, but losing an auction caused a marked decrease in the brain’s reward centers, driving the subjects in subsequent auctions to bid more aggressively and drive up prices by overbidding. (If market speculators don’t come to mind immediately, you’re not thinking hard enough.)
The results go against previous notions of risk aversion or joy of winning being the driving forces for overbidding, suggesting fear of losing is the primary factor. Ars Technica’s Tim De Chant, in a post titled “Scientists discover why we overbid for old junk on eBay,” delivers this harrowing tidbit, coming in the wake of the apparent collapse of Nixonian economics, which the proposed fear-based federal bailout would seek to artificially perpetuate:
The results, the authors say, were not predicted by current economic theory. Similar neuroscience studies, they added, may eventually help shape new advances in economic theory.
So, keep that in mind the next time you bid at an auction, online or off: losing may not be as painful as the potential emptiness in your wallet.
*I know that sounds a bit obtuse, but in light of certain recent economic crises, where economists who believed theoretically-existent people would buy a bunch of houses with theoretically existent (faith-based) currency are now requesting reasonable people who don’t like existing in theoretical constructions to print money and create credit so these economists’ greed-based faiths can be realized and so all is not lost—does cat food sound appetizing to you? they ask—the fear of losing idea seems especially relevant.
