Intensity of bidding drives desire to win and willingness to pay in auctions

November 14, 2018 by Michael Brown, University of Alberta
Credit: CC0 Public Domain

How fast a competitor counters your bid during an auction will increase your desire to win—and likely your willingness to pay for the auctioned product, according to a new study by a pair of University of Alberta business professors.

"The more intense is in an auction, the more likely it is that a buyer will be gripped by bidding frenzy," said U of A marketing professor Peter Popkowski Leszczyc, who carried out the study with marketing colleague Gerald Häubl.

The researchers invited people to participate in what they were told was a live, campus-wide online auction. In actuality, the subjects were simply bidding against a program designed to oppose bids at various speeds.

"We found the quickness of being outbid by someone else causes consumers to perceive an auction as being more intensely competitive, which in turn boosts the desire to win and, ultimately, results in an increased willingness to pay," said Popkowski Leszczyc.

He added the bidding frenzy phenomenon did not materialize if just a time pressure was introduced into the experiment. The effect also hinged on direct competitive interaction with other human bidders and vanished when the speed of being outbid is determined by a software agent, for instance.

"Once people know they were bidding against a machine, like on eBay, the effects went away."

And while the speed of competitor reaction has a strong impact on how much consumers were willing to pay for a product, Popkowski Leszczyc said it did not influence their beliefs about the product's objective value or retail price.

As well, being outbid more quickly increases willingness to pay for the auctioned product regardless of whether one is bidding against a single other bidder or a large number of them.

He noted the research has important implications for anyone who participates in ascending-bid auctions.

Popkowski Leszczyc suggested participants should resist the temptation to race to outbid other auction participants.

"You should try to strategically slow down the bidding process so as to 'cool down' an 's perceived competitive intensity, thus preventing other bidders from getting into a bidding frenzy," he said.

He added bidders might accomplish this by specifying their maximum to pay by setting a proxy bid and sticking to it.

"After that, set your limits and walk away. Very often people go back, look and then increase it a little more."

Explore further: How to digitally stoke that old-time auction fever

More information: Gerald Häubl et al. Bidding Frenzy: Speed of Competitor Reaction and Willingness to Pay in Auctions, Journal of Consumer Research (2018). DOI: 10.1093/jcr/ucy056

Related Stories

How to digitally stoke that old-time auction fever

July 28, 2015

Whether online auctions are selling rare Pokemon cards or fine art, the science behind inciting the highest bids gets a boost from a paper to be published in the September issue of the Journal of Retailing. Researchers from ...

Fox-Comcast battle to buy Sky to be settled by auction in UK

September 20, 2018

Comcast and 21st Century Fox will settle their battle for control of broadcaster Sky through a rare auction designed to put an end to months of offers and counteroffers from the American media empires seeking a foothold in ...

eBay Mind Games

December 11, 2009

Psychologists have long known that when two people haggle over a price, it pays for the seller to start high.

Recommended for you


Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.