Abstract

We propose an analytical framework for studying bidding behavior in online auctions. The framework focuses on three key dimensions: the multi-stage process, the types of value-signals employed at each phase, and the dynamics of bidding behavior whereby early choices impact subsequent bidding decisions. We outline a series of propositions relating to the auction entry decision, bidding decisions during the auction, and bidding behavior at the end of an auction. In addition, we present the results of three preliminary field studies that investigate factors that influence consumers' value assessments and bidding decisions. In particular, (a) due to a focus on the narrow auction context, consumers under-search and, consequently, overpay for widely available commodities (CDs, DVDs) and (b) auction starting prices lead to higher winning bids, but only when comparable items are not available in the immediate context. We discuss the implications of this research with respect to our understanding of the key determinants of consumer behavior in this increasingly important arena of purchase decisions. - 2 - Web-based auctions have become one of the greatest successes of the Internet, success that has not diminished even after many other web-based services have lost their initial popularity. The growing importance of online auctions has attracted the attention of consumer researchers, who have studied such issues as herding behavior (Dholakia & Soltysinski, 2001), the impact of reserve prices (Hubl & Popkowski Leszczyc, 2001), the role of expertise (Wilcox, 2000), and the effects of auction formats (Lucking-Reiley, 1999). Still, our understanding of buyer (bidder) behavior in online auctions is rather limited. In particular, acquiring an item through online auctions is different i...

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