Skip to main content

Advertisement

Springer Nature Link
Log in

Understanding auction fever: a framework for emotional bidding

  • General Research
  • Published:
Electronic Markets Aims and scope Submit manuscript

Abstract

Auction fever is a multifaceted phenomenon that is frequently observed in both traditional and Internet auctions. In order to gain a better understanding of its causes, we develop a conceptual framework to analyze emotions in auctions, which is based on an exhaustive literature review. The framework integrates rational calculus with emotional aspects and suggests that emotional processing is triggered at three different stages of an auction: First, the economic environment can affect a bidder’s level of perceived competition and thus influence the bidding strategy prior to the auction. Second, auction events may have ramifications on the bidder’s emotional state during the auction due to previous investments or perceived ownership. Third, past auction outcomes may impact future bidding behavior through emotions such as the joy of winning or loser regret. Auction fever, eventually, is a phenomenon that results from the interplay of these emotional processes and causes a bidder to deviate from an initially chosen bidding strategy.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Subscribe and save

Springer+ Basic
$34.99 /Month
  • Get 10 units per month
  • Download Article/Chapter or eBook
  • 1 Unit = 1 Article or 1 Chapter
  • Cancel anytime
Subscribe now

Buy Now

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3

Similar content being viewed by others

Notes

  1. We thank an anonymous referee for pointing this out.

  2. To the best of our knowledge there are no studies to date that have systematically investigated the hypothesized direct relationship between auction events and immediate emotions (P3). In the conclusion, we argue that this should be subject to future neuro- or physioeconomic studies.

References

  • Abele, S., Ehrhart, K.-M., & Ott, M. (2006). An experiment on auction fever. In S. Seifert & C. Weinhardt (Eds.), Proceedings of the 7th Group Decision and Negotiation Conference (pp. 86–88). Germany: Karlsruhe.

    Google Scholar 

  • Adam, M. T. P., Gamer, M., Hey, S., Ketter, W., & Weinhardt, C. (2009). Measuring the impact of emotions on decision-making in electronic markets: A physio-economic approach. In D. M. Kilgour & Q. Wang (Eds.), Proceedings of the 10th Group Decision and Negotiation Conference (pp. 193–196). Canada: Toronto.

    Google Scholar 

  • Andreoni, J., Che, Y.-K., & Kim, J. (2007). Asymmetric information about rivals’ types: An experiment. Games and Economic Behavior, 59, 240–259.

    Article  Google Scholar 

  • Ariely, D., & Simonson, I. (2003). Buying, bidding, playing, or competing? value assessment and decision dynamics in online auctions. Journal of Consumer Psychology, 13, 113–123.

    Google Scholar 

  • Arkes, H. R., & Blumer, C. (1985). The psychology of sunk costs. Organizational Behavior and Human Decision Processes, 35(1), 124–140.

    Article  Google Scholar 

  • Bapna, R., Goes, P., & Gupta, A. (2001). Insights and analyses of online auctions. Communications of the ACM, 44(11), 42–50.

    Article  Google Scholar 

  • Bault, N., Coricelle, G., & Rustichini, A. (2008). Interdependent utilities: How social ranking affects choice behavior. PloS One, 3(10), 1–10.

    Article  Google Scholar 

  • Bechara, A., & Damasio, A. R. (2005). The somatic marker hypothesis: A neural theory of economic decision. Games and Economic Behavior, 52(2), 336–372.

    Article  Google Scholar 

  • Bosman, R., & Riedl, A. (2003). Emotions and economic shocks in a first-price auction: An experimental study. SSRN working papers, from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=417660, 1–29

  • Bosman, R., & van Winden, F. (2002). Emotional hazard in a power-to-take- experiment. The Economic Journal, 112(476), 147–169.

    Article  Google Scholar 

  • Boucsein, W. (1992). Electrodermal activity. Berlin: Springer.

    Google Scholar 

  • Carare, O., & Rothkopf, M. (2005). Slow Dutch auctions. Management Science, 51(3), 365–373.

    Article  Google Scholar 

  • Connolly, T., & Butler, D. (2006). Regret in economic and psychological theories of choice. Journal of Behavioral Decision Making, 19, 139–154.

    Article  Google Scholar 

  • Cooper, D., & Fang, H. (2008). Understanding overbidding in second price auctions: An experimental study. The Economic Journal, 118, 1572–1595.

    Article  Google Scholar 

  • Dawson, M. E., Schell, A. M., & Filion, D. L. (2007). The electrodermal system. In J. T. Cacioppo, L. G. Tassinary, & G. G. Berntson (Eds.), Handbook of psychophysiology (3rd ed., pp. 159–181). Cambridge: Cambridge Univ. Press.

    Google Scholar 

  • Delgado, M. R., Schotter, A., Ozbay, E. Y., & Phelphs, E. A. (2008). Understanding overbidding: Using the neural circuitry of reward to design economic auctions. Science, 321(5897), 1849–1852.

    Article  Google Scholar 

  • Ding, M., Eliashberg, J., Huber, J., & Saini, R. (2005). Emotional bidders: An analytical and experimental examination of consumers’ behavior in a priceline-like reverse auction. Management Science, 51(3), 352–364.

    Article  Google Scholar 

  • Ehrhart, K.-M., Ott, M., Abele, S. (2008). Auction fever: Theory and experimental evidence. SFB 504 discussion paper series, no. 08–27, from http://www.sfb504.uni-mannheim.de/publications/dp08-27.pdf.

  • Engelbrecht-Wiggans, R. (1989). The effect of regret on optimal bidding in auctions. Management Science, 35(6), 685–692.

    Article  Google Scholar 

  • Engelbrecht-Wiggans, R., & Katok, E. (2007). Regret in auctions: Theory and evidence. Economic Theory, 33(1), 81–101.

    Article  Google Scholar 

  • Engelbrecht-Wiggans, R., & Katok, E. (2008). Regret and feedback information in first-price sealed-bid auctions. Management Science, 54(4), 808–819.

    Article  Google Scholar 

  • Festinger, L. (1957). A theory of cognitive dissonance. Evanston: Row, Peterson.

    Google Scholar 

  • Filiz-Ozbay, E., & Ozbay, E. Y. (2007). Auctions with anticipated regret: Theory and experiment. The American Economic Review, 97(4), 1407–1418.

    Article  Google Scholar 

  • Friedman, D., Pommerenke, K., Lukose, R., Milam, G., & Huberman, B. A. (2007). Searching for the sunk cost fallacy. Experimental Economics, 10, 79–104.

    Article  Google Scholar 

  • Frijda, N. H. (1986). The emotions. Cambridge: Cambridge University Press.

    Google Scholar 

  • Fudenberg, D., & Tirole, J. (1998). Game theory (6th printing). Cambridge: MIT Press.

    Google Scholar 

  • Gilovich, T., Medvec, V. H., & Savitsky, K. (2000). The spotlight effect in social judgment: An egocentric bias in estimates of the salience of one’s own actions and appearance. Journal of Personality and Psychology, 78(2), 211–222.

    Article  Google Scholar 

  • Glänzer, S., & Schäfers, B. (2001). Dynamic trading network und virtuelle Auktionen im internet: Das Beispiel ricardo.de. In A. Hermanns & M. Sauter (Eds.), Management-Handbuch electronic commerce. Grundlagen, Strategien, Praxisbeispiele (pp. 609–616). München: Vahlen.

    Google Scholar 

  • Goeree, J. K., & Offerman, T. (2003). Winner’s curse without overbidding. European Economic Review, 47, 625–644.

    Article  Google Scholar 

  • Haruvy, E., & Popkowski Leszczyc, P. T. (2010). The impact of online auction duration. Decision Analysis, 7(1), 99–106.

    Article  Google Scholar 

  • Häubl, G., & Popkowski Leszczyc, P. T. (2004). The psychology of auctions: Enriching models of bidder and seller behavior. Advances in Consumer Research, 31(1), 91–92.

    Google Scholar 

  • Heyman, J. E., Orhun, Y., & Ariely, D. (2004). Auction fever: The effect of opponents and quasi-endowment on product valuations. Journal of Interactive Marketing, 18(4), 7–21.

    Article  Google Scholar 

  • Humphrey, S. J. (2004). Feedback-conditional regret theory and testing regret-aversion in risky choice. Journal of Economic Psychology, 25, 839–857.

    Google Scholar 

  • Ivanova-Stenzel, R., & Salmon, T. C. (2004). Entry fees and endogenous entry in electronic auctions. Electronic Markets, 14(3), 170–177.

    Article  Google Scholar 

  • Jennings, B., & Dorina, M. (2003). Excitation-transfer theory and three-factor theory of emotion. In B. Jennings, D. Roskos-Ewoldsen, & J. Cantor (Eds.), Communication and emotion essays in honor of Dolf Zillmann (pp. 31–59). Mahwah: Lawrence Erlbaum Associates Publishers.

    Google Scholar 

  • Johns, C. L., & Zaichkowsky, J. L. (2003). Bidding behavior at the auction. Psychology and Marketing, 20(4), 303–322.

    Article  Google Scholar 

  • Kahneman, D., Knetsch, J., & Thaler, R. H. (1990). Experimental tests of the endowment effect and the Coase theorem. The Journal of Political Economy, 98(6), 1325–1348.

    Article  Google Scholar 

  • Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263–292.

    Article  Google Scholar 

  • Katok, E., & Kwasnica, A. M. (2008). Time is money: The effect of clock speed on seller’s revenue in Dutch auctions. Experimental Economics, 11(4), 344–357.

    Article  Google Scholar 

  • Klemperer, P. (1999). Auction theory: A guide to the literature. Journal of Economic Surveys, 13(3), 227–286.

    Article  Google Scholar 

  • Kogan, S., & Morgan, J. (2009). Securities auctions under moral hazard: An experimental study. Review of Finance, 13(2), 1–44.

    Google Scholar 

  • Köszegi, B., & Rabin, M. (2006). A model of reference-dependent preferences. Quarterly Journal of Economics, 121(4), 1133–1165.

    Google Scholar 

  • Krishna, V. (2002). Auction theory. San Diego: Acad. Press.

    Google Scholar 

  • Ku, G. (2000). Auctions and auction fever: Explanations from competitive arousal and framing. Kellogg Journal of Organization Behavior, 1–32.

  • Ku, G., Galinsky, A. D., Murnighan, J. K. (2008). Arousal, interest, and auction bidders, SSRN working papers, from http://ssrn.com/abstract=1298572.

  • Ku, G., Malhotra, D., & Murnighan, J. K. (2005). Towards a competitive arousal model of decision-making: A study of auction fever in live and Internet auctions. Organizational Behavior and Human Decision Processes, 96, 89–103.

    Article  Google Scholar 

  • Lee, M.-Y., Kim, Y.-K., & Fairhurst, A. (2009). Shopping value in online auctions: Their antecedents and outcomes. Journal of Retailing and Consumer Services, 16, 75–82.

    Article  Google Scholar 

  • Lee, Y. H., & Malmendier, U. (2007). The bidder’s curse. NBER working paper no. W1369, forthcoming in American Economic Review, from http://ssrn.com/abstract=1080202.

  • Loewenstein, G. (2000). Emotions in economic theory and economic behavior. The American Economic Review, 90(2), 426–432.

    Article  Google Scholar 

  • Loewenstein, G., Weber, E. U., Hsee, C. K., & Welch, N. (2001). Risk as feelings. Psychological Bulletin, 127(2), 267–286.

    Article  Google Scholar 

  • Lucking-Reiley, D. (1999). Using field experiments to test equivalence between auction formats: Magic on the Internet. The American Economic Review, 89(5), 1063–1080.

    Article  Google Scholar 

  • Malhotra, D., Ku, G., & Murnighan, J. K. (2008). When winning is everything. Harvard Business Review, 86(5), 78–86.

    Google Scholar 

  • Malmendier, U., & Szeidl, A. (2008). Fishing for fools. Working paper, UC Berkeley, from http://www.econ.berkeley.edu/~szeidl/papers/fishing_for_fools.pdf, 1–49.

  • Maule, A. J., Hockey, G. R. J., & Bdzola, L. (2000). Effects of time-pressure on decision-making under uncertainty: Changes in affective state and information processing. Acta Psychologica, 104, 283–301.

    Article  Google Scholar 

  • McAfee, R. P., & McMillan, J. (1987). Auctions and bidding. Journal of Economic Literature, 25(2), 699–738.

    Google Scholar 

  • Meyer, D. J. (1993). First price auctions with entry: An experimental investigation. The Quarterly Review of Economics and Finance, 33(2), 107–122.

    Article  Google Scholar 

  • Möllenberg, A. (2004). Internet auctions in marketing: The consumer perspective. Electronic Markets, 14(4), 360–371.

    Article  Google Scholar 

  • Morgan, J., Steiglitz, K., & Reis, G. (2003). The spite motive and equilibrium behavior in auctions. Contributions to Economic Analysis & Policy, 2(1), 1102–1127.

    Google Scholar 

  • Murnighan, J. K. (2002). A very extreme case of the dollar auction. Journal of Management Education, 26, 56–69.

    Article  Google Scholar 

  • Myers, D. G. (2004). Psychology (7th ed.). New York: Worth Publishers.

    Google Scholar 

  • Ockenfels, A., Reiley, D., & Sadrieh, A. (2006). Online auctions. In T. J. Hendershott (Ed.), Handbooks in information systems: Vol. 1. Economics and information systems (pp. 571–628). Amsterdam, The Netherlands: Elsevier.

    Google Scholar 

  • Osborne, M. J., & Rubinstein, A. (1998). A course in game theory (5th printing). Cambridge, MA: MIT Press.

    Google Scholar 

  • Park, S. C., Kim, J., & Bock, G. W. (2008). Understanding a bidder’s escalation of commitment in the online C2C auction. In Z. Irani, S. Sahraoui, A. Ghoneim, J. Sharp, S. Ozkan, M. Ali, et al. (Eds.), European Mediterranean Conference on Information Systems (EMCIS). Dubai, UAE: Late Breaking Papers.

    Google Scholar 

  • Rasmusen, E. (2007). Games and information: An introduction to game theory (4th ed.). Malden, Mass: Blackwell.

    Google Scholar 

  • Rick, S., & Loewenstein, G. (2008). The role of emotion in economic behavior. In M. Lewis, J. M. Haviland-Jones, & L. F. Barrett (Eds.), Handbook of emotions (3rd ed., pp. 138–156). New York: The Guilford Press.

    Google Scholar 

  • Romer, P. M. (1990). Endogenous technological change. The Journal of Political Economy, 98(2), 71–102.

    Article  Google Scholar 

  • Roth, A. E., & Ockenfels, A. (2002). Last-minute bidding and the rules for ending second-price auctions: Evidence from eBay and Amazon auctions on the Internet. The American Economic Review, 92(4), 1093–1103.

    Article  Google Scholar 

  • Rottenberg, J., Ray, R. D., & Gross, J. J. (2007). Emotion elicitation using films. In J. A. Coan & J. J. B. Allen (Eds.), Handbook of emotion elicitation and assessment (pp. 9–28). New York: The Guilford Press.

    Google Scholar 

  • Russell, J. A., & Mehrabian, A. (1977). Evidence for a three factor theory of emotions. Journal of Research in Personality, 11, 273–294.

    Article  Google Scholar 

  • Staw, B. M. (1976). Knee-deep in the big muddy: A study of escalating commitment to a chosen course of action. Organizational Behavior and Human Decision Processes, 16, 27–44.

    Google Scholar 

  • Staw, B. M., & Ross, J. (1989). Understanding behavior in escalation situations. Science, 246, 216–220.

    Article  Google Scholar 

  • Stern, B., Royne, M. B., Stafford, T. F., & Bienstock, C. C. (2008). Consumer acceptance of online auctions: An extension and revision of the TAM. Psychology and Marketing, 25(7), 619–636.

    Article  Google Scholar 

  • Sun, Y., & Wu, S. (2008). The effect of emotional state on waiting in decision making. Social Behavior and Personality, 36, 591–602.

    Article  Google Scholar 

  • Thaler, R. H. (1980). Toward a positive theory of consumer choice. Journal of Economic Behavior & Organization, 1(1), 39–60.

    Article  Google Scholar 

  • Vickrey, W. (1961). Counterspeculation, auctions, and competitive sealed tenders. The Journal of Finance, 16(1), 8–37.

    Article  Google Scholar 

  • Zajonc, R. B. (1965). Social facilitation. Science, 149, 269–274.

    Article  Google Scholar 

  • Zajonc, R. B. (1984). On the primacy of affect. American Psychologist, 39(2), 117–123.

    Article  Google Scholar 

  • Zeelenberg, M. (1999). Anticipated regret, expected feedback and behavioral decision-making. Journal of Behavioral Decision Making, 12, 93–106.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Institute for Information Systems and Management, Karlsruhe Institute of Technology, Kaiserstr. 12, Bldg. 01.80, 76131, Karlsruhe, Germany

    Marc T. P. Adam, Jan Krämer, Stefan Seifert & Christof Weinhardt

  2. Chair of Business Education and Human Resource Development, Georg-August-University Göttingen, Platz der Göttinger Sieben 5, 37073, Göttingen, Germany

    Caroline Jähnig

Authors
  1. Marc T. P. Adam
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Jan Krämer
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Caroline Jähnig
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Stefan Seifert
    View author publications

    You can also search for this author in PubMed Google Scholar

  5. Christof Weinhardt
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Marc T. P. Adam.

Additional information

Responsible editor: Hans-Dieter Zimmermann

Rights and permissions

Reprints and permissions

About this article

Cite this article

Adam, M.T.P., Krämer, J., Jähnig, C. et al. Understanding auction fever: a framework for emotional bidding. Electron Markets 21, 197–207 (2011). https://doi.org/10.1007/s12525-011-0068-9

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s12525-011-0068-9

Keywords

JEL