Marketing Letters

, Volume 16, Issue 3–4, pp 401–413 | Cite as

Economics, Psychology, and Social Dynamics of Consumer Bidding in Auctions

  • Amar Cheema
  • Peter T. L. Popkowski Leszczyc
  • Rajesh Bagchi
  • Richard P. Bagozzi
  • James C. Cox
  • Utpal M. Dholakia
  • Eric A. Greenleaf
  • Amit Pazgal
  • Michael H. Rothkopf
  • Michael Shen
  • Shyam Sunder
  • Robert Zeithammer
Article

Abstract

With increasing numbers of consumers in auction marketplaces, we highlight some recent approaches that bring additional economic, social, and psychological factors to bear on existing economic theory to better understand and explain consumers' behavior in auctions. We also highlight specific research streams that could contribute towards enriching existing economic models of bidding behavior in emerging market mechanisms.

Keywords

auctions bidding economic psychology social dynamics experimental economics 
This is a preview of subscription content, log in to check access.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Adams, William, J. and Janet L. Yellen. (1976). “Commodity Bundling and the Burden of the Monopoly,” Quarterly Journal of Economics 90(August), 475–498.Google Scholar
  2. Ariely, Dan and Itamar Simonson. (2003). “Buying, Bidding, Playing or Competing? Value Assessment and Decision Dynamics in Online Auctions,” Journal of Consumer Psychology 13(2), 113–123.CrossRefGoogle Scholar
  3. Ashenfelter, Orley. (1989). “How Auctions Work for Wine and Art,” Journal of Economic Perspectives 3(3), 23–36.Google Scholar
  4. Bagozzi, Richard P. (1992). “The Self-Regulation of Attitudes, Intentions, and Behavior,” Social Psychology Quarterly 55, 178–204.Google Scholar
  5. Bagozzi, Richard P., H. Baumgartner, and R. Pieters. (1998). “Goal-Directed Emotions,” Cognition and Emotion 12, 1–26.Google Scholar
  6. Bagozzi, Richard P., Utpal M. Dholakia, and S. Basuroy. (2003). “How Effortful Decisions Get Enacted: The Motivating Role of Decision Processes, Desires, and Anticipated Emotions,” Journal of Behavioral Decision Making 16, 273–295.CrossRefGoogle Scholar
  7. Banerjee, Abhijit V. (1992). “A Simple Model of Herd Behavior,” Quarterly Journal of Economics 107(3), 797–817.Google Scholar
  8. Bell, David E. and Dinny Starr. (1993). Filene's Basement. Harvard Business School case \#9-594-018.Google Scholar
  9. Bikhchandani, Sushil, David Hirshleifer, and Ivo Welch. (1992). “A Theory of Fads, Fashion, Custom and Cultural Change as Informational Cascades,” Journal of Political Economy 100(5), 992–1026.CrossRefGoogle Scholar
  10. Brenner, Lyle, Yuval Rottenstreich, and Sanjay Sood. (1999). “Comparison, Grouping, and Preference,” Psychological Science 10(3), 225–229.CrossRefGoogle Scholar
  11. Budish, Eric B. and Lis N. Takeyama. (2001). “Buy Prices in Online Auctions: Irrationality on the Internet?” Economics Letters 72(3), 325–333.CrossRefGoogle Scholar
  12. Bulow, Jeremy and Paul Klemperer. (1996). “Auctions versus Negotiations,” American Economic Review 86(1), 180–194.Google Scholar
  13. Carare, Octavian and Michael H. Rothkopf. (2005). “Slow Dutch Auctions,” Management Science 51(3), 365–373.CrossRefGoogle Scholar
  14. Chakravarti, Dipankar, Eric Greenleaf, Atanu Sinha, Amar Cheema, James C. Cox, Daniel Friedman, Teck H. Ho, R. Mark Isaac, Andrew A. Mitchell, Amnon Rapport, Michael H. Rothkopf, Joydeep Srivastava, and Rami Zwick. (2002). “Auctions: Research Opportunities in Marketing,” Marketing Letters 13(3), 281–296.CrossRefGoogle Scholar
  15. Chakraborty, Indranil. (1999). “Bundling Decisions for Selling Multiple Objects,” Economic Theory 13(3), 723–733.CrossRefGoogle Scholar
  16. Cheema, Amar, Dipankar Chakravarti, and Atanu Sinha. (2005a). “Drivers of Value Construction and Bidding Behavior in Descending and Ascending Auctions,” Working paper, Washington University in St. Louis.Google Scholar
  17. Cheema, Amar, Dipankar Chakravarti, and Atanu Sinha. (2005b). “Outcome-contingent Regret in Descending and Ascending Auctions,” Working paper, Washington University in St. Louis.Google Scholar
  18. Cox, James C. and Stephen C. Hayne. (2004). “Barking Up the Right Tree: Are Small Groups Rational Agents?” working paper, University of Arizona.Google Scholar
  19. Cox, James C. and Stephen C. Hayne. (forthcoming). “When Does an Incentive for Free-riding Promote Rational Bidding?” In R. Zwick and A. Rapoport (eds.), Experimental Business Research, vol. II. Springer.Google Scholar
  20. Davis, J. H. (1992). “Some Compelling Intuitions about Group Consensus Decisions: Theoretical and Empirical Research, and Interpersonal Aggregation Phenomena: Selected Examples, 1950–1990,” Organizational Behavior and Human Decision Processes 52, 3–38.Google Scholar
  21. Dholakia, Utpal M., Suman Basuroy, and Kerry Soltysinski. (2002). “Auction or Agent (or Both)? A Study of Moderators of the Herding Bias in Digital Auctions,” International Journal of Research in Marketing 19, 115–130.CrossRefGoogle Scholar
  22. Dholakia, Utpal M. and Itamar Simonson. (2005). “The Effect of Explicit Reference Points on Consumer Choice and Online Bidding Behavior,” Marketing Science 24(2), 206–217.CrossRefGoogle Scholar
  23. Engelbrecht-Wiggans, Richard. (1989). “The Effect of Regret on Optimal Bidding in Auctions,” Management Science 35(6), 685–692.Google Scholar
  24. Fischhoff, Baruch. (1991). “Value Elicitation: Is There Anything in There?” American Psychologist 46, 835–847.CrossRefGoogle Scholar
  25. Friedman, Daniel and Shyam Sunder. (2004). “Risky Curves: From Unobservable Utility to Observable Opportunity Sets,” Working paper, Yale University, New Haven CT.Google Scholar
  26. Friestad, Marian and Peter Wright. (1994). “The Persuasion Knowledge Model: How People Cope with Persuasion Attempts,” Journal of Consumer Research 21(June), 1–31.Google Scholar
  27. Gale, Ian L. and Hausch, Donald B. (1994), “Bottom-fishing and declining prices in sequential auctions,” Games and Economic Behavior 7, 318–331.CrossRefGoogle Scholar
  28. Greenleaf, Eric A. (2004a). “Why Do People Attend Auctions?” Presentation at the Special Session on Economics, Psychology and Social Dynamics of Consumer Bidding in Auctions, 6th Triennial Invitational Choice Symposium, Estes Park, CO.Google Scholar
  29. Greenleaf, Eric A. (2004b). “Reserves, Regret, and Rejoicing in Open English Auctions,” Journal of Consumer Research 31(2), 264–273.CrossRefGoogle Scholar
  30. Häubl, Gerald and Peter T. L. Popkowski Leszczyc. (2003). “Minimum Prices and Product Valuations in Auctions,” Marketing Science Institute Reports 3(03–117), 115–141.Google Scholar
  31. Herschlag, Miriam and Rami Zwick. (2000). “Internet Auctions: A Popular and Professional Literature Review,” Quarterly Journal of Electronic Commerce 1(2), 161–186.Google Scholar
  32. Hoffman, Elizabeth, Dale J. Menkhaus, Dipankar Chakravarti, Ray A. Field, and Glen D. Whipple. (1993). “Using Laboratory Experimental Auctions in Marketing Research: A Case Study of New Packaging for Fresh Beef,” Marketing Science 12(3), 318–338.Google Scholar
  33. Kagel, John H., Ronald M. Harstad, and Dan Levin. (1987). “Information Impact and Allocation Rules in Auctions with Affiliated Private Values: A Laboratory Study,” Econometrica 55, 1275–1304.Google Scholar
  34. Kamins, Michael, Xavier Dreze, and Valerie S. Folkes. (2004). “Effects of Seller-Supplied Prices on Buyers' Product Evaluations: Reference Prices in an Internet Auction Context,” Journal of Consumer Research 30(4), 622–628.Google Scholar
  35. Klemperer, Paul. (1999). “Auction Theory: A Guide to the Literature,” Journal of Economic Surveys 13(3), 227–286.CrossRefGoogle Scholar
  36. Laudon, Kenneth C. and Carol G. Traver. (2004). E-commerce: Business, Technology, Society, 2nd Ed. Boston, MA: Addison-Wesley.Google Scholar
  37. Lucking-Reiley, David. (1999). “Using Field Experiments to Test Equivalence Between Auction Formats: Magic on the Internet,” American Economic Review 89(5), 1063–1079.Google Scholar
  38. McAfee, R. Preston and John McMillan. (1996). “Competition and Game Theory,” Journal of Marketing Research 25(August), 263–267.Google Scholar
  39. Milgrom, Paul and Robert J. Weber. (2000). “A Theory of Auctions and Competitive Bidding, II.” In Paul Klemperer (ed.), The Economic Theory of Auctions, Cheltenham: Edward Elgar. vol. 2, pp. 179–194.Google Scholar
  40. Palfrey. Thomas R. (1983). “Bundling Decisions by a Multi-product Monopolist with Incomplete Information,” Econometrica 512(March), 463–484.Google Scholar
  41. Pazgal, Amit and Ganesh Iyer. (2004). “(Capacity) Constrained Bidding,” Working paper, John M. Olin School of Business, Washington University in Saint Louis.Google Scholar
  42. Popkowski Leszczyc, Peter T. L., Gerald Häubl, and Michael Shen. (2004). “An Empirical Analysis of the effectiveness of Bundling Strategies in Auctions,” Working paper, University of Alberta, CA.Google Scholar
  43. Popkowski Leszczyc, Peter T. L., John W. Pracejus, and Michael Shen. (2005). “Why More Can Be Less: An Inference-Based Explanation for Hyper-Subadditivity in Product Bundles,” Working paper, University of Alberta, CA.Google Scholar
  44. Roth, Alvin E. and Axel Ockenfels. (2002). “Last Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet,” American Economic Review 92(4), 1093–1103.Google Scholar
  45. Rothkopf, Michael H. (1991). “On Auctions with Withdrawable Winning Bids,” Marketing Science 10(1), 40–57.Google Scholar
  46. Rothkopf, Michael H. and Ronald M. Harstad. (1994). “Modeling Competitive Bidding: A Critical Essay,” Management Science 40(3), 364–384.Google Scholar
  47. Schmalensee, Richard. (1984). “Gaussian Demand and Commodity Bundling,” Journal of Business 57(1), 211–230.CrossRefGoogle Scholar
  48. Simon, Herbert A. (1955). “A Behavioral Model of Rational Choice,” Quarterly Journal of Economics 69, 99–118.Google Scholar
  49. Sinha, Atanu R. and Eric A. Greenleaf. (2000). “The Impact of Discrete Bidding and Bidder Aggressiveness on Seller's Strategies in Open English Auctions: Reserves and Covert Shilling,” Marketing Science 19(3), 244–265.CrossRefGoogle Scholar
  50. Smith, Charles W. (1989). Auctions: The Social Construction of Value. New York: Free Press.Google Scholar
  51. Smith, Charles W. (1993). “Auctions: From Walras to the Real World.” In Richard Swedberg (ed.), Explorations in Economic Sociology. New York: Sage.Google Scholar
  52. Wall, Cynthia. (1997). “The English Auction: Narratives of Dismantlings,” Eighteenth Century Studies 1–25.Google Scholar
  53. Zeithammer, Robert. (2005a). “Forward-Looking Bidding in Online Auctions,” Working paper, University of Chicago.Google Scholar
  54. Zeithammer, Robert. (2005b). “An Equilibrium Model of a Dynamic Auction Marketplace,” Working paper, University of Chicago.Google Scholar
  55. Zeng, Daniel, James C. Cox and Moshe Dror. (forthcoming). “Coordination of Purchasing and Bidding Activities Across Posted Offer and Auction Markets,” Journal of Information Systems and e-Business Management.Google Scholar

Copyright information

© Springer Science + Business Media, Inc. 2005

Authors and Affiliations

  • Amar Cheema
    • 1
  • Peter T. L. Popkowski Leszczyc
    • 2
  • Rajesh Bagchi
    • 3
  • Richard P. Bagozzi
    • 4
  • James C. Cox
    • 5
  • Utpal M. Dholakia
    • 6
  • Eric A. Greenleaf
    • 7
  • Amit Pazgal
    • 8
  • Michael H. Rothkopf
    • 9
  • Michael Shen
    • 2
  • Shyam Sunder
    • 10
  • Robert Zeithammer
    • 11
  1. 1.Olin School of BusinessWashington UniversitySt. Louis
  2. 2.University of AlbertaAlberta
  3. 3.University of ColoradoBoulder
  4. 4.University of Michigan
  5. 5.University of Arizona
  6. 6.Rice UniversityUSA
  7. 7.New York University
  8. 8.Washington UniversitySaint Louis
  9. 9.Rutgers UniversityUSA
  10. 10.Yale UniversityUSA
  11. 11.University of ChicagoChicago

Personalised recommendations