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Think, feel, bid: the impact of environmental conditions on the role of bidders’ cognitive and affective processes in auction bidding

Author

Listed:
  • Anuja Hariharan

    (Karlsruhe Institute of Technology (KIT))

  • Marc Thomas Philipp Adam

    (University of New Castle)

  • Timm Teubner

    (Karlsruhe Institute of Technology (KIT))

  • Christof Weinhardt

    (Karlsruhe Institute of Technology (KIT))

Abstract

Environmental conditions and the interplay of cognitive and affective processes both exert influences on bidding behavior. This paper brings the above together, considering how the (external) auction environment determines the impact of (internal) cognitive and affective processes on bidding behavior, assessed in comparison to the optimal bid. Two aspects of the auction environment were considered, namely auction dynamics (low: first-price sealed-bid auction, high: Dutch auction) and value uncertainty (low, high). In a laboratory experiment, we assess bidders’ cognitive workload and emotional arousal through physiological measurements. We find that higher auction dynamics increase the impact of emotional arousal on bid deviations, but not that of cognitive workload. Higher value uncertainty, conversely, increases the impact of cognitive workload on bid deviations, but not that of emotional arousal. Taken together, the auction environment is a critical factor in understanding the nature of the underlying decision process and its impact on bids.

Suggested Citation

  • Anuja Hariharan & Marc Thomas Philipp Adam & Timm Teubner & Christof Weinhardt, 2016. "Think, feel, bid: the impact of environmental conditions on the role of bidders’ cognitive and affective processes in auction bidding," Electronic Markets, Springer;IIM University of St. Gallen, vol. 26(4), pages 339-355, November.
    • Handle: RePEc:spr:elmark:v:26:y:2016:i:4:d:10.1007_s12525-016-0224-3
    DOI: 10.1007/s12525-016-0224-3
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    Cited by:

    1. Rainer Alt & Hans-Dieter Zimmermann, 2016. "Electronic Markets on electronic markets in education," Electronic Markets, Springer;IIM University of St. Gallen, vol. 26(4), pages 311-314, November.
    2. Ninoslav Malekovic & Lazaros Goutas & Juliana Sutanto & Dennis Galletta, 2020. "Regret under different auction designs: the case of English and Dutch auctions," Electronic Markets, Springer;IIM University of St. Gallen, vol. 30(1), pages 151-161, March.
    3. Marc T. P. Adam & Jan Krämer, 2022. "Evaluating the emotional bidding framework: new evidence from a decade of neurophysiology," Electronic Markets, Springer;IIM University of St. Gallen, vol. 32(3), pages 1529-1540, September.
    4. Fabian Ocker, 2018. "“Bid more, pay less” – overbidding and the Bidder’s curse in teleshopping auctions," Electronic Markets, Springer;IIM University of St. Gallen, vol. 28(4), pages 491-508, November.

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    More about this item

    Keywords

    Arousal; Workload; Bidding; Heart rate; EEG;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D87 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Neuroeconomics
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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