Bidding Behavior in Descending and Ascending Auctions

Authors:
Amar Cheema;Dipankar Chakravarti;Atanu R. Sinha
Affiliations:
McIntire School of Commerce, University of Virginia, Charlottesville, Virginia 22903;Carey Business School, Johns Hopkins University, Baltimore, Maryland 21202;Leeds School of Business, University of Colorado, Boulder, Colorado 80309
Venue:
Marketing Science
Year:
2012

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Abstract

This research examines how individual differences and institutional practices influence consumer bidding in auctions. Bidders may be motivated by different goals, e.g., thrill (of winning the item, with minimal attention to what they pay for it) versus prudence (winning the item at a price at or below its perceived value). Also, innate or auctioneer-induced differences may exist in the precision and salience of bidder cognitions about the item's value. We report two studies on how these motivational and cognitive factors influence bids in descending and ascending auctions, respectively. Each study also manipulated a situational variable (wait time at each price step). The two auctions realized different average prices for the same item set. Average bids were higher in the descending (versus ascending) auction in several study conditions. In both auction formats, bidders primed with thrill (versus prudence) bid higher, but more precise and/or salient values attenuated this goal effect. Among other results, in the descending auction, longer wait times elicited higher bids from bidders primed with thrill (but not prudence). In the ascending auction, longer wait times produced lower bids for bidders primed with prudence (but not thrill). These findings on consumer bidding behavior have practical implications for auction design.