Bidding, playing, or competing? : rational and irrational determinants in Internet auctioning

Abstract

Auctions, especially Internet auctions, are claimed to be efficient pricing mechanisms, assuming rational behavior and recognition of individual fundamental values. This assumption and its implication are at the heart of the thesis work. The research includes both survey studies which utilize one of the most popular sites for Internet auctions, and experiments developed in the laboratory. Both field studies and laboratory experiments paid specific attention to the psychology of bidders with main focuses on starting prices, price comparison, competition, and auction formats. Two surveys and two field studies were conducted to collect statistics in real auctions and subjective opinions from real auction participants. One field experiment was performed on a real web site to test price sensitivity. A simulation bidding system was built in the laboratory to examine auction formats and the effect of competition. Four primary results are shown. First, game-playing attitude towards auctions generally exists among bidders. Second, bidders hold strong winning aspects and suffer either "winner's curse" or regret losing. Third, bidders are price sensitive when price comparison is available and their price preferences are affected by the original starting prices. Fourth, auction formats convey different information to bidders and influence the way bidders behave. (Keywords: Auctions, Internet auctioning, Individual fundamental values, Bidders' behavior)