CLUTCH EDITIONS — AUCTION INTELLIGENCE
Blog Post — Auction Resources Series
Auction Fever Is Real. The Research Behind Why Bidders Overpay
Bidders at live auctions routinely pay more than the item is worth. Uncertainty drives up the heat — and the data proves it.
In 2013, economist Peter McGee published “Bidding in Private-Value Auctions with Uncertain Values” in Games and Economic Behavior, one of the leading journals in experimental economics. The study set out to understand what happens to bidding behavior when the value of an item isn’t fully known until after the auction ends.
What he found confirmed something auction organizers have observed for years but rarely had the language to explain: when uncertainty is present, a meaningful percentage of bidders pay more than the item is objectively worth — and no standard economic model of risk preference can account for it.
What the research found
McGee ran controlled laboratory auctions in two formats: sealed-bid, where each bidder submits one price without seeing others’ bids, and ascending-bid, where participants compete openly and can see the bidding progress in real time.
In both formats, he introduced uncertainty about the final value of the item — bidders knew a range of possible outcomes but not the exact value they’d receive until after winning. Then he measured how often bids exceeded the item’s expected value.
18% vs. 27% Share of bids exceeding expected value — sealed-bid versus ascending-bid auctions with uncertain values.
In sealed-bid auctions, 18% of bids came in above the item’s expected value. In ascending-bid auctions — where bidders compete openly and can see each other raising the price in real time — that figure rose to 27%. More bidders overbid, they overbid more frequently, and the auctions were more likely to be won by someone who paid above expected value.
Critically, McGee found that risk preference — the standard economic explanation for overbidding — could not account for the pattern. The overbidding wasn’t coming from people who simply liked taking risks. It was coming from the specific combination of uncertainty and live competitive bidding.
The role of the ascending-bid format
The gap between the two auction formats is the most important finding in the study for event organizers. Sealed-bid auctions produced some overbidding. Ascending-bid auctions — the format used in virtually every live and mobile charity auction — produced significantly more, both in frequency and magnitude.
McGee’s explanation points to the dynamic nature of ascending-bid competition. When bidders can see prices rising in real time and watch others actively competing for the same item, something changes in how they process value. The act of competing — of being outbid and deciding whether to respond — appears to generate a state that pushes bids beyond what the bidder would have paid if asked in advance.
Uncertainty is the accelerant. Without it, the overbidding patterns McGee documented don’t emerge at the same scale
What this means for auction design
For item selection: auction fever is only triggered by uncertainty. Items with fully known, easily verifiable market values don’t produce it. Items where the outcome isn’t fully known until the winner opens them carry a structural advantage in ascending-bid formats that known-value items simply don’t have.
For how you run the room: McGee’s data points to something specific about why the ascending-bid format outperforms sealed-bid when uncertainty is present. The difference isn’t just the format — it’s the visibility. Bidders in ascending-bid auctions can see prices rising in real time, watch others staying in the competition, and make active decisions about whether to continue. That live, visible dynamic is what separates a 27% overbid rate from 18%.
For organizers, this means the conditions that allow auction fever to develop are largely within your control. Clear bid visibility, active time pressure as the auction closes, and an auctioneer who keeps the room engaged during competitive rounds all maintain the ascending-bid dynamic that McGee’s research identifies as the environment where overbidding is most likely to occur naturally. The format does the work — but only if the room is run in a way that keeps bidders actively in pursuit rather than passively watching.
McGee’s research doesn’t suggest that auction fever should be manufactured artificially or that bidders should be manipulated into paying more than they want to. It documents a real psychological state that emerges naturally when the right conditions are present — and understanding those conditions is what allows organizers to design auctions that perform at their ceiling rather than well below it.
McGee’s paper is published in Games and Economic Behavior, vol. 82 (2013), pp. 312–326.
This post is part of the Clutch Editions Auction Intelligence series — a collection of research summaries and practical guides for event organizers who want to build stronger auction catalogs.