Special Session Summary Processes Underlying Consumer Valuations and Behavior in Various Auction Mechanisms

Citation:

Amar Cheema and Dipankar Chakravarti (2003) ,"Special Session Summary Processes Underlying Consumer Valuations and Behavior in Various Auction Mechanisms", in NA - Advances in Consumer Research Volume 30, eds. Punam Anand Keller and Dennis W. Rook, Valdosta, GA : Association for Consumer Research, Pages: 211-212.

Advances in Consumer Research Volume 30, 2003     Pages 211-212

SPECIAL SESSION SUMMARY

PROCESSES UNDERLYING CONSUMER VALUATIONS AND BEHAVIOR IN VARIOUS AUCTION MECHANISMS

Amar Cheema, University of Colorado, Boulder

Dipankar Chakravarti, University of Colorado, Boulder

SESSION OVERVIEW

Interest in how consumer motivations and cognitions interact with the mechanistic aspects of common auction formats has grown as consumers participate in ever larger numbers in Internet auctions. Although there is extensive work on the economic theory of auctions (Klemperer 2000) and many empirical tests with laboratory experiments and field data (e.g., Kagel 1995; Laffont 1997) there is little work on auctions in marketing and consumer research.

While previous empirical tests in the experimental economic paradigm have documented revenue equivalence failures (e.g., Kagel 1995), the fictitious commodities and auction procedures used in these studies provide a limited understanding of motivational and cognitive influences on consumer behavior across these auction mechanisms. Moreover, apart from evidence of contextually labile and constructive values (e.g., Fischhoff 1991) prior studies assume surplus maximization goals induced via specific payoff structures (e.g., Cox et al 1982). The paradigm has also generally ignored alternative motivations and cognitive drivers that are differentially served by the various auction mechanisms. The session included three presentations addressing how consumer motivations and cognitions interacted with aspects of various auction mechanisms implemented in both traditional and on-line formats.

Greenleaf and Srivastava studied the effects of different auction formats on factors such as attribution, regret and perceived risk and linked these mediators to differences in bidder satisfaction and preferences. They explored the processes for open English, Dutch and sealed-bid auctions, all for common-value items. Because the auction mechanisms reveal different information about other bidders’ behavior, they produce different patterns of results that then drive satisfaction and preference differences across the auction types.

The Ariely, Ockenfels and Roth paper investigated how and why different rules that govern auction closings influence bidding behavior. They motivated their research with the observation that two popular auction sites (eBay and Amazon) use "hard" and "soft" closing rules respectively, and that the former site experiences significantly greater late bidding. The authors replicated the field results in a controlled laboratory setting, and also demonstrated the moderating influence of factors such as expertise and learning on bidder behavior.

Cheema, Chakravarti and Sinha focused more on the antecedents and processes of bidder value formation under various auction mechanisms. They examined the separate and interactive influence of bidder motivations, prior price knowledge, and the time available at each auction step on value construction processes during ascending and descending auctions. These authors also examined how consumers experience regret contingent on auction win/loss outcomes, and how they manipulate their post auction values to manage regret. Their results showed that how consumer values are constructed during, and managed following, an auction depended on the primed goal, prior price knowledge and deliberation time available to the bidders in the specific auction format.

The three papers together demonstrated that consumer motivations and cognitions interact with aspects of various auction mechanisms both in traditional and on-line formats. Overall, consumers’ behavior is contingent on various individual-specific and contextual factors. Further study of consumers’ auction participation should also focus on the consumer experience and the specifics of the auction mechanism itself.

 

SHORT ABSTRACT - S

BIDDERS’ SATISFACTION AND VALUATION FOR DIFFERENT AUCTION MECHANISMS: THE IMPACT OF ATTRIBUTION, REGRET, AND PERCEIVED RISK

Eric Greenleaf, New York University

Joydeep Srivastava, University of Maryland

This paper examines how three different auction typesBopen English, descending bid (Dutch), and sealed bid with first pricesBaffect the consumer auction experience. Specifically, given that the three auction formats differ in the information provided to bidders on other bidders’ bids and also place different cognitive demands, we argue that the three auction types are perceived differentially in terms of bidders’ attributions, regret, and risk. These factors, in turn, affect bidders’ satisfaction with each of the auction types and their preferences and valuations for them. Results from an experiment where subjects participated in ten auctions of each type support the premise that in addition to actual earnings, attributions, regret, and risk are important determinants of future auction intentions and behavior.

 

AN EXPERIMENTAL ANALYSIS OF ENDING RULES IN INTERNET AUCTIONS

Dan Ariely, MIT

Axel Ockenfels, Max Planck Institute for Research into Economic Systems

Alvin E. Roth, Harvard University

A great deal of late bidding has been observed on internet auctions such as eBay, which employ a second price auction with a fixed deadline. Much less late bidding has been observed on internet auctions such as those run by Amazon, which employ similar auction rules, but use an ending rule that automatically extends the auction if necessary after the scheduled close until ten minutes have passed without a bid. This paper reports an experiment that allows us to examine the effect of the different ending rules under controlled conditions, without the other differences between internet auction houses that prevent unambiguous interpretation of the field data. We find that the difference in auction ending rules i sufficient by itself to produce the differences in late bidding observed in the field data. The experimental data also allow us to examine how individuals bid in relation to their private values, and how this behavior is shaped by the different opportunities for learning provided in the auction conditions.

 

MOTIVATIONAL AND COGNITIVE INFLUENCES ON CONSUMER VALUE CONSTRUCTION AND BIDDING IN ASCENDING AND DESCENDING AUCTIONS

Amar Cheema, University of Colorado, Boulder

Dipankar Chakravarti, University of Colorado, Boulder

Atanu Sinha, University of Colorado, Boulder

This paper experimentally investigates motivational and cognitive influences on how consumers construct value and bid on real objects in both ascending and descending auctions. We focus on how bidders’ motivations interact with knowledge (prior price information) and deliberation time (at each price level) to influence bidding behavior. We also examine how consumers mentally manipulate their own and competitors’ values to manage post-auction regret, contingent on win/loss outcomes. Bidders’ behavior in a second auction was also studied to assess the impact of regret on subsequent behavior. The results for the descending auctions show that bidders’ values are influenced interactively by their motivations, deliberation time and prior knowledge. Moreover, bidders with goal-incongruent outcomes experience greater regret than those with goal-congruent outcomes, attempt to manipulate their value after the auction to minimize regret, and change their behavior in the second auction accordingly.

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