BBC Column: auction psychology

My BBC Future column from last week. The original is here

The reason we end up overspending is a result of one unavoidably irrational part of the bidding process – and that’s ourselves.

The allure and tension of an auction are familiar to most of us – let’s face it, we all like the idea of picking up a bargain. And on-line auction sites like eBay cater for this, allowing us to share in the over-excitement of auction bidding in the privacy of our homes. Yet somehow, despite our better judgement, we end up paying more than we know we should have done on that piece of furniture, equipment or clothing. What’s going on?

One estimate states that about half of eBay auctions result in higher sale prices than the “buy it now” price. This is a paradox. If the people going into the auction really wanted the item so badly, why didn’t they get it for less by paying the “buy it now” price?

This has nothing to do with the way the eBay bidding system works. In fact, unlike most auctions, the eBay auction process is actually perfectly designed to allow rational outcomes. By allowing you to set a private “maximum bid” in advance, eBay auctions are better for individual buyers than public auctions where everyone has to shout out their bid in public. No, the reason auctions – both on and offline – produce higher sale prices than any bidder originally imagined they would pay is because of one irreducibly irrational part of the bidding process: the bidders themselves.

Auctions push a number of our psychological buttons, and in fact the phenomenon of “auction fever” is well documented. They are social occasions, with lots of other people around, and this tends to increase your physiological arousal, an effect called social facilitation. As your adrenaline pumps, your heart beats faster, and your reactions quicken. This is ideal for something like sports, but makes cool rational decision making harder. The very rich often send delegates to auctions, and as well as avoiding the paparazzi I suspect this is also a strategy to combat the over-excitement induced by being physically present in the situation.

On top of this, auctions are time pressured, and – by definition – you’re bidding on something you value highly. These factors create excitement whether you are in the room or not.

Persuasive powers

Another psychological bias that operates in auctions is the endowment effect, where we tend to over-value things we already possess. By encouraging us to connect the bid (our money) with the sale item, bidding on items lets us fantasise about owning them – stimulating a kind of endowment effect. This is why the auction catalogue (or the item picture and description on a website) is so important. This forms part of the psychological journey the seller wants you to go on to imagine owning this item in advance, so you’ll place a higher value on it, and so pay more to make imagination reality.

Persuasion plays a huge part here, and the best book you can read on the psychology of the subject is Robert Cialdini’s Influence. Cialdini is a Professor of Social Psychology at Arizona State University, and he lists six major ways you can make yourself persuasive. Auctions hit at least two of these six principles square on the nose.

First, auctions use the principle of scarcity, whereby we overvalue things that we think might run out. Auction items are scarce in that they are unique (only one person can have it), and scarce in time (after the bids are finished, you’ve lost your chance). Think how many shop sales successfully rely on scarcity heuristics such as “Last day of sale!”, or “Only 2 left in stock!”, and you’ll get a feel for how powerful this persuasion principle can be.

The other principle used by auctions is that of “social proof”. We all tend to take the lead from other people; if everybody does something, or says something, most of us join in before we think about what we really should do. Auctions put you in intimate contact with other people who are all providing social proof that the sale item is important and valuable.

A final ingredient in the magic-spell cast by auctions was uncovered by researchers from Princeton. Their experiments asked volunteers to play on-line auctions with different rules. Some of these auctions had rules that encouraged over-bidding (like typical open auctions, which most of us are familiar with from movies), and some had rules that encouraged rational behaviour (like the eBay structure). With enough guidance from the auction rules, the bidders didn’t end up paying much more than they originally thought was reasonable – but only if they thought they were bidding against a computer programme. As soon as the volunteers thought they were bidding against other live humans they found it impossible to bid rationally, whatever the auction rules.

This implies that the competitive element of auctions is crucial to provoking our irrational buying behaviour. Once we’re involved in an auction we’re not just paying to own the sale item, we’re paying to beat other people who are bidding and prevent them from having it.

So it seems Gore Vidal had human nature, and the psychology of auctions, about right when he said: “It is not enough to succeed. Others must fail.”

Fake pot industry generating novel, untested drugs

There’s an excellent article on the highs and increasing lows of the synthetic marijuana ‘legal high’ industry in the Broward Palm Beach New Times.

The piece is an in-depth account of how a legal high company called Mr. Nice Guy became the biggest fake pot manufacturer in the US.

It describes in detail how the business created and sold the product – only to fall foul of the rush ban on the first wave of synthetic cannabinoids.

The company was eventually raided by the Drugs Enforcement Agency and is waiting for the case to be tried in court. However, it’s still not clear whether they actually broke the law.

They changed their formula a few months before the raid to use two cannabinoids, called UR-144 and 5-fluoro-ur-144, which are not specifically covered by the current ban, so the prosecutors have to argue that they are close enough to the prohibited molecules to be illegal.

A curious point not mentioned in the article is that cannabinoid 5-fluoro-ur-144, also known as XLR-11, had never previously been described in the scientific literature and was first detected in synthetic marijuana.

It is listed by companies that sell research chemicals (for example, here) so you can buy it straight from the commercials labs.

But the data sheet makes it clear that structurally it is “expected to be a cannabinoid” but actually, it has never been tested – nothing is known about its effects or toxicity.

Previously, grey-market labs were picking out legal chemicals confirmed to be cannabinoids from the scientific literature and synthesizing them to sell to legal high manufacturers.

But now, they are pioneering their own molecules, based on nothing but an educated guess on how they might affect the brain, for the next wave of legislation-dodging drugs.

Fake pot smokers are now first-line drug testers for these completely new compounds.

Link to ‘The Fake-Pot Industry Is Coming Down From a Three-Year High’.

Avoiding the shadows

The Lancet has a powerful essay on children born from rape and the social and psychological consequences for mother, child and community.

I’ll let the article speak for itself as it carefully articulates how the relationship between mother and child can be affected by these tragic events.

There is one point worth highlighting, however. The piece notes that when affected women do have contact with healthcare professionals, clinicians often avoid tackling problems with childcare because they are denied or ignored by the mothers who, understandably, find it difficult to address problems linked to such a violent and painful event.

The article notes that the wellbeing of the child is often not well addressed as “Many practitioners who care for women who have been raped maintain this silence because either their focus is on the well-being of the mother or they genuinely believe that the interests of the mother and child are not served by articulating relational difficulties”.

Mental health professionals rightly identify avoidance as one of the key factors that maintain problematic behaviours. It’s a strategy that places short-term comfort above longer-term well-being and we all use it, but when we rely it to manage serious emotional or behavioural difficulties it can mean we never recover.

But what is less admitted is that healthcare professionals also suffer from avoidance. We don’t like making people distressed, even when it is necessary to overcome serious difficulties. Consequently, we also avoid addressing painful issues, which is something that can also help maintain the problem in the person we are working with.

Ironically, it is very difficult to get healthcare professionals to recognise that they themselves are affected by this. We are much more comfortable when the problems are safely situated in the patient.

Link to Lancet article ‘Child in the shadowlands’ (via @EvaAlisic)

A comment on Szasz

One of the most interesting commentaries I’ve ever read on Thomas Szasz, the long-time critic of psychiatry who recently passed away, has been left as a comment in the obituary we recently published.

The comment is by ‘Aporeticist’ and he or she is clearly a fierce critic of modern psychiatry (to the point of indulging in sweeping generalisations at times) but the analysis of Szasz is remarkably insightful and cuts to the core of both his triumphs and failings.

Many of Szasz’s early critics have over the years quietly come around to some of his basic views. (Karl Menninger was one of his colleagues who acknowledged his change of heart.) The notion that the great majority of people with mental illness should never be hospitalized against their will (even when they are troublesome to those around them) has become common sense. It remains one of the great injustices of history that the psychiatric establishment continues to refuse to credit Szasz with being the first member of his profession who, in the mid 1960s, stated on record — against the unanimous opinion of his colleagues — the revolutionary contention that homosexuality was not a disease, and that it didn’t warrant “treatment” of any kind.

The classical liberal notion of “live and let live” resonates closely with the “first, do no harm” of the Hippocratic Oath that Thomas Szasz took as a young medical doctor. For better or worse, Szasz remained consistently faithful to these principles of negative freedom his whole life. Those, however, who believe that, as individuals and as a society, we have a moral obligation to (somehow) assist the mentally ill even when they don’t reach out for support, would regard Szasz’s characterization of psychiatric paternalism as “cruel compassion” as equally descriptive of his own apparent lack of concern for the welfare of those labelled mentally ill. Szasz tirelessly defended the autonomy of even the most severely disturbed mental patients (so long as they didn’t violate the law), yet seemed to care little whether they live or die if no one infringed on their sacred negative rights.

Recommended. Thanks Aporeticist.

Link to commentary on Szasz’s legacy by Aporeticist.

Unwritten rules of the road

The latest edition of The Psychologist has a fantastic discussion on the psychology of how drivers, cyclists and pedestrians interact.

Rather appropriately, it’s with psychologist Ian Walker, who makes lots of interesting points about how different road users are perceived and how that affects behaviour.

…the lack of understanding of the cyclist outgroup seems to produce measurable changes in other road users’ behaviour. A few years ago I did a study which showed that changing the appearance of a cyclist led to notable changes in how much space drivers left when passing the bicycle. The specific changes seen make sense given the small body of research on non-cyclists’ stereotypes of cyclists. The two extant studies – the Lynn Basford et al. one, and research by Birgitta Gatersleben and Hebba Haddad, in 2010 – both found that non-cyclists view bicycle helmets as an indicator of an experienced rider, and in my data we saw riskier behaviour from drivers when they passed a cyclist who was wearing a helmet, which fits the idea they saw the rider as more capable.

The positive lesson from this, I feel, is that drivers do adjust their behaviour to the perceived needs of the non-drivers they are interacting with. The problem is that they do not always understand how to read these other people and judge their needs.

The whole issue of The Psychologist is a special and transport psychology and all of it is open-access this month.

Link to interview with Ian Walker.
Link to September issue of The Psychologist.

Declaration of interest: I’m an unpaid associate editor and occasional columnist for The Psychologist and a low-skilled pedestrian.

Human Touch

A curious article has just appeared in the latest edition of the International Journal of Group Psychotherapy. The opening line of the summary is oddly delightful:

The group, with its intensity, interaction, roles and dynamics, is an important unit of experience in everyday life, in psychotherapy groups, and in Bruce Springsteen’s music.

The author, psychotherapist Lorraine Mangione, has written a previous paper on how “Bruce Springsteen is an eloquent spokesperson for the psychological journey through darkness, disconnection, and despair that many people experience, and for which they might look to professional psychologists for help.”

My own paper, ‘Firestarter: Deviant Behaviour and Psychopathy in the Music of The Prodigy’ is still a work in progress.

Link to locked article on psychotherapy and The Boss (via @Neuro_Skeptic)

Hallucinations caused by lightning

A 23-year-old mountain climber was hit by a lightning bolt and awoke in hospital to find herself experiencing bizarre hallucinations.

The case, reported in BMJ Case Reports, describes how the healthy young woman was mountaineering with her climbing partner when they heard heard cracking thunder and were thrown to the ground by a massive shockwave.

The air rescue team took her to hospital and she was put in a drug induced coma for three days as she was disoriented and extremely agitated.

When she awoke, her world was somewhat different.

In the evening, still awake and 6 h after extubation, strange phenomena occurred. These exclusively visual sensations consisted of unknown people, animals and objects acting in different scenes, as if in a movie. None of the persons or scenes was familiar to her and she was severely frightened by their occurrence. For example, an old lady was sitting on a ribbed radiator, who then became thinner and thinner, finally vanishing through the slots of the radiator. Later, on her left side a cowboy riding on a horse came from the distance. As he approached her, he tried to shoot her, making her feel defenceless because she could not move or shout for help.

In another scene, two male doctors, one fair and one dark haired, and a woman, all with strange metal glasses and unnatural brownish-red faces, were tanning in front of a sunbed, then having sexual intercourse and afterwards trying to draw blood from her. These formed hallucinations, partially with delusional character, were in the whole visual field and constantly present for approximately 20 h. At the time of appearance, the patient was not sure whether they were real or unreal, but did not report them for fear that she might be considered insane. However, as she was still frightened after cessation of the hallucinations, she insisted on being transferred to her hometown hospital. Over the next few days, she had increasingly better insight and later forgot about this episode.

Her brain scan showed damage to the occipital lobes, the areas at the back of the brain that are largely taken up with the visual cortex that deal with the early stages of visual perception.

Luckily, the patient survived without sustaining any serious brain damage although the article mentions that because the occipital lobe has so many blood vessels “it could be particularly vulnerable to lightning damage”.

Link to case report on lightning-strike hallucinations.