Does mixing eBay and Facebook reduce bidding prices?
In a competitive context, consumers are willing to pay significantly more to win when other bidders are unknown, according to a new study in the Journal of Consumer Research.
"The tendency to assume that other consumers are similar to us is reversed when we're in a competitive, as opposed to cooperative, situation. This alters our aggressiveness toward others and the prices we are willing to bid in auctions," write authors David A. Norton (University of Connecticut), Cait Lamberton (University of Pittsburgh), and Rebecca Walker Naylor (Ohio State University).
Consumers tend to believe strangers are socially similar. This lowers aggressiveness toward others. But competitive contexts lead consumers to become more aggressive because they infer that others are different.
In a series of simulated online auctions, some consumers viewed profiles of other bidders that were manipulated to be either similar or different (based on demographic information like age, gender, and location), while others weren't given any information about other bidders. Consumers consistently bid less aggressively when they believed their competitors were similar rather than different. More interestingly, bidding aggressiveness and prices were much higher when other bidders were different or unknown.
Companies using auctions may want to resist the urge to link consumers to social media profiles. Consumers who discover they share traits with the people they're competing against may lower their aggressiveness, pushing prices down.
"Competitive contexts radically change the assumptions we make about other consumers compared to cooperative situations. When we compete, we want to go for the jugular – and we won't do that when we know we're competing against consumers who are similar to us. But we behave more aggressively when there is no other information about other consumers because we assume they are different," the authors conclude.