Emotional Bidders-An Analytical and Experimental Examination of Consumers' Behavior in a Priceline-Like Reverse Auction

Authors:
Min Ding;Jehoshua Eliashberg;Joel Huber;Ritesh Saini
Affiliations:
Smeal College of Business, Pennsylvania State University, University Park, Pennsylvania 16802;The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104;Fuqua School of Business, Duke University, Durham, North Carolina 27708;School of Management, George Mason University, Fairfax, Virginia 22030
Venue:
Management Science
Year:
2005

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Abstract

E-commerce has proved to be fertile ground for new business models, which may be patented (for up to 20 years) and have potentially far-reaching impact on the e-commerce landscape. One such electronic market is the reverse-auction model popularized by Priceline.com. There is still uncertainty surrounding the survival of such new electronic markets currently available on the Internet. Understanding user behavior is necessary for better assessment of these sites' survival. This paper adds to economic analysis a formal representation of the emotions evoked by the auction process, specifically, the excitement of winning if a bid is accepted, and the frustration of losing if it is not. We generate and empirically test a number of insights related to (1) the impact of expected excitement at winning, and frustration at losing, on bids across consumers and biddings scenarios; and (2) the dynamic nature of the bidding behavior-that is, how winning and losing in previous bids influence their future bidding behavior.