The Effects of Induced Mood on Preference Reversals and Bidding Behavior in Experimental Auction Valuation

This article contributes to the research agenda of accommodating psychological insights in conventional lab experiments. We specifically test whether inducing subjects into different mood states has a significant effect on subjects rationality (in the form of preference reversals) and on bidding behavior in homegrown value auctions. We find that mood states can significantly affect the rate of preference reversal and bidding behavior in experimental auction valuation. Specifically we find that subjects exhibit more rational behavior under a positive mood state than under a negative mood state. Subjects in a positive mood provide lower bid values than others. Regardless of mood states, males tend to commit a higher rate of preference reversal than females in mixed gender sessions. However, females tend to commit higher rate of preference reversal in female only sessions than in mixed sessions while males tend to commit a lower rate of preference reversal when in male only sessions than in mixed sessions.