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Check out this interesting piece about irrational user behavior at eBay.

Ms. Malmendier tracked 166 auctions offering CashFlow 101, a personal-finance-themed board game. During the seven-month trial, the game’s designer sold the box set on his website for $195.
Meanwhile, eBay sellers usually offered an opening price of about $45 and set a one-click, “buy it now” price of about $125. It looked like a great deal for buyers. They could pay less than retail to end the auction immediately or place bids in the hope of fetching an even lower price.
But this is where eBay users fell prey to what Malmendier and her coauthor, Stanford University economist Hanh Lee, call “bidder’s curse.” Apparently, some bidders grew so enthusiastic about winning the auction that they lost sight of the “buy it now” price, sometimes offering more than $185.
“We found that in 43% of the auctions the bidders ended up paying more than the ‘buy it now’ price,” Malmendier says.

Another example

Instead of observing auctions initiated by others, like Malmendier, Hossain posts his own controlled auctions. He offers identical items, but plays with the specifics of the sale. For example, he auctioned pairs of popular music CDs. One copy would start at $4 and include free shipping. The other would open at 1 cent but charge $3.99 for shipping. Either way, the initial cost was four bucks.

But bidders didn’t see it that way. On average, the low-cost, high-shipping auction attracted more bids, more bidders, and 25% more money.

“There are a number of ways to explain this,” says John Morgan, of UC Berkeley, who cowrote the study, “but my favorite is that people have two different budgets in their head: how much I’m willing to pay for the item, and how much I’m willing to pay for shipping.”

I guess we are not really rational? Or may be its just an issue with eBay? What do you think?