Buying, bidding, playing, or competing? Value assessment and decision dynamics in online auctions

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) higher auction starting prices tend to lead to higher winning bids, particularly 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.