Understanding auction fever: a framework for emotional bidding
- 808 Downloads
Auction fever is a multifaceted phenomenon that is frequently observed in both traditional and Internet auctions. In order to gain a better understanding of its causes, we develop a conceptual framework to analyze emotions in auctions, which is based on an exhaustive literature review. The framework integrates rational calculus with emotional aspects and suggests that emotional processing is triggered at three different stages of an auction: First, the economic environment can affect a bidder’s level of perceived competition and thus influence the bidding strategy prior to the auction. Second, auction events may have ramifications on the bidder’s emotional state during the auction due to previous investments or perceived ownership. Third, past auction outcomes may impact future bidding behavior through emotions such as the joy of winning or loser regret. Auction fever, eventually, is a phenomenon that results from the interplay of these emotional processes and causes a bidder to deviate from an initially chosen bidding strategy.
KeywordsAuctions Auction fever Emotions
JELD03 D44 L81
- Abele, S., Ehrhart, K.-M., & Ott, M. (2006). An experiment on auction fever. In S. Seifert & C. Weinhardt (Eds.), Proceedings of the 7th Group Decision and Negotiation Conference (pp. 86–88). Germany: Karlsruhe.Google Scholar
- Adam, M. T. P., Gamer, M., Hey, S., Ketter, W., & Weinhardt, C. (2009). Measuring the impact of emotions on decision-making in electronic markets: A physio-economic approach. In D. M. Kilgour & Q. Wang (Eds.), Proceedings of the 10th Group Decision and Negotiation Conference (pp. 193–196). Canada: Toronto.Google Scholar
- Ariely, D., & Simonson, I. (2003). Buying, bidding, playing, or competing? value assessment and decision dynamics in online auctions. Journal of Consumer Psychology, 13, 113–123.Google Scholar
- Bosman, R., & Riedl, A. (2003). Emotions and economic shocks in a first-price auction: An experimental study. SSRN working papers, from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=417660, 1–29
- Boucsein, W. (1992). Electrodermal activity. Berlin: Springer.Google Scholar
- Dawson, M. E., Schell, A. M., & Filion, D. L. (2007). The electrodermal system. In J. T. Cacioppo, L. G. Tassinary, & G. G. Berntson (Eds.), Handbook of psychophysiology (3rd ed., pp. 159–181). Cambridge: Cambridge Univ. Press.Google Scholar
- Ehrhart, K.-M., Ott, M., Abele, S. (2008). Auction fever: Theory and experimental evidence. SFB 504 discussion paper series, no. 08–27, from http://www.sfb504.uni-mannheim.de/publications/dp08-27.pdf.
- Festinger, L. (1957). A theory of cognitive dissonance. Evanston: Row, Peterson.Google Scholar
- Frijda, N. H. (1986). The emotions. Cambridge: Cambridge University Press.Google Scholar
- Fudenberg, D., & Tirole, J. (1998). Game theory (6th printing). Cambridge: MIT Press.Google Scholar
- Glänzer, S., & Schäfers, B. (2001). Dynamic trading network und virtuelle Auktionen im internet: Das Beispiel ricardo.de. In A. Hermanns & M. Sauter (Eds.), Management-Handbuch electronic commerce. Grundlagen, Strategien, Praxisbeispiele (pp. 609–616). München: Vahlen.Google Scholar
- Häubl, G., & Popkowski Leszczyc, P. T. (2004). The psychology of auctions: Enriching models of bidder and seller behavior. Advances in Consumer Research, 31(1), 91–92.Google Scholar
- Humphrey, S. J. (2004). Feedback-conditional regret theory and testing regret-aversion in risky choice. Journal of Economic Psychology, 25, 839–857.Google Scholar
- Jennings, B., & Dorina, M. (2003). Excitation-transfer theory and three-factor theory of emotion. In B. Jennings, D. Roskos-Ewoldsen, & J. Cantor (Eds.), Communication and emotion essays in honor of Dolf Zillmann (pp. 31–59). Mahwah: Lawrence Erlbaum Associates Publishers.Google Scholar
- Kogan, S., & Morgan, J. (2009). Securities auctions under moral hazard: An experimental study. Review of Finance, 13(2), 1–44.Google Scholar
- Köszegi, B., & Rabin, M. (2006). A model of reference-dependent preferences. Quarterly Journal of Economics, 121(4), 1133–1165.Google Scholar
- Krishna, V. (2002). Auction theory. San Diego: Acad. Press.Google Scholar
- Ku, G. (2000). Auctions and auction fever: Explanations from competitive arousal and framing. Kellogg Journal of Organization Behavior, 1–32.Google Scholar
- Ku, G., Galinsky, A. D., Murnighan, J. K. (2008). Arousal, interest, and auction bidders, SSRN working papers, from http://ssrn.com/abstract=1298572.
- Lee, Y. H., & Malmendier, U. (2007). The bidder’s curse. NBER working paper no. W1369, forthcoming in American Economic Review, from http://ssrn.com/abstract=1080202.
- Malhotra, D., Ku, G., & Murnighan, J. K. (2008). When winning is everything. Harvard Business Review, 86(5), 78–86.Google Scholar
- Malmendier, U., & Szeidl, A. (2008). Fishing for fools. Working paper, UC Berkeley, from http://www.econ.berkeley.edu/~szeidl/papers/fishing_for_fools.pdf, 1–49.
- McAfee, R. P., & McMillan, J. (1987). Auctions and bidding. Journal of Economic Literature, 25(2), 699–738.Google Scholar
- Morgan, J., Steiglitz, K., & Reis, G. (2003). The spite motive and equilibrium behavior in auctions. Contributions to Economic Analysis & Policy, 2(1), 1102–1127.Google Scholar
- Myers, D. G. (2004). Psychology (7th ed.). New York: Worth Publishers.Google Scholar
- Ockenfels, A., Reiley, D., & Sadrieh, A. (2006). Online auctions. In T. J. Hendershott (Ed.), Handbooks in information systems: Vol. 1. Economics and information systems (pp. 571–628). Amsterdam, The Netherlands: Elsevier.Google Scholar
- Osborne, M. J., & Rubinstein, A. (1998). A course in game theory (5th printing). Cambridge, MA: MIT Press.Google Scholar
- Park, S. C., Kim, J., & Bock, G. W. (2008). Understanding a bidder’s escalation of commitment in the online C2C auction. In Z. Irani, S. Sahraoui, A. Ghoneim, J. Sharp, S. Ozkan, M. Ali, et al. (Eds.), European Mediterranean Conference on Information Systems (EMCIS). Dubai, UAE: Late Breaking Papers.Google Scholar
- Rasmusen, E. (2007). Games and information: An introduction to game theory (4th ed.). Malden, Mass: Blackwell.Google Scholar
- Rick, S., & Loewenstein, G. (2008). The role of emotion in economic behavior. In M. Lewis, J. M. Haviland-Jones, & L. F. Barrett (Eds.), Handbook of emotions (3rd ed., pp. 138–156). New York: The Guilford Press.Google Scholar
- Rottenberg, J., Ray, R. D., & Gross, J. J. (2007). Emotion elicitation using films. In J. A. Coan & J. J. B. Allen (Eds.), Handbook of emotion elicitation and assessment (pp. 9–28). New York: The Guilford Press.Google Scholar
- Staw, B. M. (1976). Knee-deep in the big muddy: A study of escalating commitment to a chosen course of action. Organizational Behavior and Human Decision Processes, 16, 27–44.Google Scholar