Skip to main content
SpringerLink
Log in

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

  • Published:
Marketing Letters Aims and scope Submit manuscript

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.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • 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 

  • 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.

    Article  Google Scholar 

  • Ashenfelter, Orley. (1989). “How Auctions Work for Wine and Art,” Journal of Economic Perspectives 3(3), 23–36.

    Google Scholar 

  • Bagozzi, Richard P. (1992). “The Self-Regulation of Attitudes, Intentions, and Behavior,” Social Psychology Quarterly 55, 178–204.

    Google Scholar 

  • Bagozzi, Richard P., H. Baumgartner, and R. Pieters. (1998). “Goal-Directed Emotions,” Cognition and Emotion 12, 1–26.

    Google Scholar 

  • 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.

    Article  Google Scholar 

  • Banerjee, Abhijit V. (1992). “A Simple Model of Herd Behavior,” Quarterly Journal of Economics 107(3), 797–817.

    Google Scholar 

  • Bell, David E. and Dinny Starr. (1993). Filene's Basement. Harvard Business School case \#9-594-018.

  • 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.

    Article  Google Scholar 

  • Brenner, Lyle, Yuval Rottenstreich, and Sanjay Sood. (1999). “Comparison, Grouping, and Preference,” Psychological Science 10(3), 225–229.

    Article  Google Scholar 

  • Budish, Eric B. and Lis N. Takeyama. (2001). “Buy Prices in Online Auctions: Irrationality on the Internet?” Economics Letters 72(3), 325–333.

    Article  Google Scholar 

  • Bulow, Jeremy and Paul Klemperer. (1996). “Auctions versus Negotiations,” American Economic Review 86(1), 180–194.

    Google Scholar 

  • Carare, Octavian and Michael H. Rothkopf. (2005). “Slow Dutch Auctions,” Management Science 51(3), 365–373.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Chakraborty, Indranil. (1999). “Bundling Decisions for Selling Multiple Objects,” Economic Theory 13(3), 723–733.

    Article  Google Scholar 

  • 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.

  • Cheema, Amar, Dipankar Chakravarti, and Atanu Sinha. (2005b). “Outcome-contingent Regret in Descending and Ascending Auctions,” Working paper, Washington University in St. Louis.

  • Cox, James C. and Stephen C. Hayne. (2004). “Barking Up the Right Tree: Are Small Groups Rational Agents?” working paper, University of Arizona.

  • 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.

  • 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 

  • 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.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Engelbrecht-Wiggans, Richard. (1989). “The Effect of Regret on Optimal Bidding in Auctions,” Management Science 35(6), 685–692.

    Google Scholar 

  • Fischhoff, Baruch. (1991). “Value Elicitation: Is There Anything in There?” American Psychologist 46, 835–847.

    Article  Google Scholar 

  • Friedman, Daniel and Shyam Sunder. (2004). “Risky Curves: From Unobservable Utility to Observable Opportunity Sets,” Working paper, Yale University, New Haven CT.

  • 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 

  • Gale, Ian L. and Hausch, Donald B. (1994), “Bottom-fishing and declining prices in sequential auctions,” Games and Economic Behavior 7, 318–331.

    Article  Google Scholar 

  • 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.

  • Greenleaf, Eric A. (2004b). “Reserves, Regret, and Rejoicing in Open English Auctions,” Journal of Consumer Research 31(2), 264–273.

    Article  Google Scholar 

  • 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 

  • 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 

  • 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 

  • 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 

  • 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 

  • Klemperer, Paul. (1999). “Auction Theory: A Guide to the Literature,” Journal of Economic Surveys 13(3), 227–286.

    Article  Google Scholar 

  • Laudon, Kenneth C. and Carol G. Traver. (2004). E-commerce: Business, Technology, Society, 2nd Ed. Boston, MA: Addison-Wesley.

    Google Scholar 

  • 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 

  • McAfee, R. Preston and John McMillan. (1996). “Competition and Game Theory,” Journal of Marketing Research 25(August), 263–267.

    Google Scholar 

  • 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 

  • Palfrey. Thomas R. (1983). “Bundling Decisions by a Multi-product Monopolist with Incomplete Information,” Econometrica 512(March), 463–484.

    Google Scholar 

  • Pazgal, Amit and Ganesh Iyer. (2004). “(Capacity) Constrained Bidding,” Working paper, John M. Olin School of Business, Washington University in Saint Louis.

  • 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.

  • 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.

  • 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 

  • Rothkopf, Michael H. (1991). “On Auctions with Withdrawable Winning Bids,” Marketing Science 10(1), 40–57.

    Google Scholar 

  • Rothkopf, Michael H. and Ronald M. Harstad. (1994). “Modeling Competitive Bidding: A Critical Essay,” Management Science 40(3), 364–384.

    Google Scholar 

  • Schmalensee, Richard. (1984). “Gaussian Demand and Commodity Bundling,” Journal of Business 57(1), 211–230.

    Article  Google Scholar 

  • Simon, Herbert A. (1955). “A Behavioral Model of Rational Choice,” Quarterly Journal of Economics 69, 99–118.

    Google Scholar 

  • 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.

    Article  Google Scholar 

  • Smith, Charles W. (1989). Auctions: The Social Construction of Value. New York: Free Press.

    Google Scholar 

  • Smith, Charles W. (1993). “Auctions: From Walras to the Real World.” In Richard Swedberg (ed.), Explorations in Economic Sociology. New York: Sage.

    Google Scholar 

  • Wall, Cynthia. (1997). “The English Auction: Narratives of Dismantlings,” Eighteenth Century Studies 1–25.

  • Zeithammer, Robert. (2005a). “Forward-Looking Bidding in Online Auctions,” Working paper, University of Chicago.

  • Zeithammer, Robert. (2005b). “An Equilibrium Model of a Dynamic Auction Marketplace,” Working paper, University of Chicago.

  • 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.

Download references

Author information

Authors and Affiliations

  1. Olin School of Business, Washington University, CB 1133, St. Louis, MO, 63130

    Amar Cheema

  2. University of Alberta, Alberta

    Peter T. L. Popkowski Leszczyc & Michael Shen

  3. University of Colorado, Boulder

    Rajesh Bagchi

  4. University of Michigan, Michigan

    Richard P. Bagozzi

  5. University of Arizona, Arizona

    James C. Cox

  6. Rice University, USA

    Utpal M. Dholakia

  7. New York University, New York

    Eric A. Greenleaf

  8. Washington University, Saint Louis

    Amit Pazgal

  9. Rutgers University, USA

    Michael H. Rothkopf

  10. Yale University, USA

    Shyam Sunder

  11. University of Chicago, Chicago

    Robert Zeithammer

Authors
  1. Amar Cheema
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Peter T. L. Popkowski Leszczyc
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Rajesh Bagchi
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Richard P. Bagozzi
    View author publications

    You can also search for this author in PubMed Google Scholar

  5. James C. Cox
    View author publications

    You can also search for this author in PubMed Google Scholar

  6. Utpal M. Dholakia
    View author publications

    You can also search for this author in PubMed Google Scholar

  7. Eric A. Greenleaf
    View author publications

    You can also search for this author in PubMed Google Scholar

  8. Amit Pazgal
    View author publications

    You can also search for this author in PubMed Google Scholar

  9. Michael H. Rothkopf
    View author publications

    You can also search for this author in PubMed Google Scholar

  10. Michael Shen
    View author publications

    You can also search for this author in PubMed Google Scholar

  11. Shyam Sunder
    View author publications

    You can also search for this author in PubMed Google Scholar

  12. Robert Zeithammer
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Amar Cheema.

Additional information

This paper is based on the special session at the 6th Triennial Invitational Choice Symposium, University of Colorado Boulder, June 2004 (co-chaired by the first two authors).

Rights and permissions

Reprints and permissions

About this article

Cite this article

Cheema, A., Leszczyc, P.T.L.P., Bagchi, R. et al. Economics, Psychology, and Social Dynamics of Consumer Bidding in Auctions. Market Lett 16, 401–413 (2005). https://doi.org/10.1007/s11002-005-5901-5

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11002-005-5901-5

Keywords

Search

Navigation