Social Presence: Influence on Bidders in Internet Auctions
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RESEARCH Social Presence: Influence on Bidders in Abstract We study effects of social processes’ Internet Auctions representation in Internet auctions using laboratory experiments. The inability of participating parties to learn about each SHEIZAF RAFAELI AND AVI NOY others’ bidding behaviour and to extend their comprehension beyond what is pre- sented in auction sites today decreases the social influence compared to traditional face-to-face auctions. This reality is about to change since new interaction and collaboration technologies are emerging. A conceptual model used here associates social factors influencing bidders and the resulting bidding behaviour. We utilized an online auction simulation framework that facilitates transmission of social cues during an auction and conducted empirical study of behaviour in both English and Dutch INTRODUCTION The Internet is perceived to auctions. We found that social presence, be ‘cold’ and impersonal. Many expressed by virtual presence and Internet auctions are software-based e-commerce websites enhance interpersonal information, significantly implementations of a traditional auc- usability and sociability by providing affects both bidding behaviour and market tion format. Online auctions may visual display of sales representatives, outcomes. have some inherent advantages. sales agents and virtual 3D environ- Keywords: auctions, bidding behavior, They allow access to a larger pool of ments. Social presence in traditional computer mediated communication, potential buyers; remove some time face-to-face commerce is replicated internet auctions, social presence, social and space constraints; decrease trans- in online environments. However, cognition online action costs and increase information though online auctioning is tremen- availability. At the same time, in a dously popular and social interaction computer-mediated environment, as is an essential part of traditional opposed to face-to-face interactions, auctions, Internet auction sites were buyers cannot manually touch or not affected by this trend. handle the item that is on sale, and This study tests how social presence Authors both sellers and buyers have more of bidders in online auctions affects Sheizaf Rafaeli difficulties sizing up the other. This bidding behaviour. The conceptual ([email protected]) is a professor of Downloaded By: [Schmelich, Volker] At: 20:39 23 March 2010 limitation raises issues of perceived model emphasizes the relationship Information Systems and is the Director risk and imposes behavioural limita- between social factors affecting the of the Center for the Study of the tions. Since direct and indirect inter- individual bidder, the influence that is Information Society at the Graduate action among auction bidders is generated by others, and the resulting School of Business Administration, limited, the influence of one on the bidding behaviour. We utilize an University of Haifa, Israel. He has published extensively about computer- others is ostensibly precluded. innovative auction framework that mediated communication, virtual Many scholars have noted the embodies communication technol- communities and the value of influence of technology on the social ogy to extend and express social information. He has been involved in context in shaping the ways in which context during the auction. We report studying and building Internet-based the medium is used. There is even a on the results of a study conducted activities, and is interested in their social popular slogan about the medium with this framework. and organizational impacts and 2005 Electronic Markets being the message. In this study the Two auctions models: English and potentials. ß focus is on the reverse influence – Dutch auctions were used in this Avi Noy from social context and layout to study. An English auction is an ([email protected]), Ph.D in Information Systems, is a researcher of technology. Social factors that affect ascending price auction and is the Copyright Volume 15 (2): 158–175. www.electronicmarkets.org DOI: 10.1080/10196780500083886 Internet auctions, e-commerce and bidding strategies in brick and mor- most popular auction mechanism in Computer Mediated Communication tar auctions may have different traditional and online environments. (CMC). He is a teaching fellow at the effects when using computerized A Dutch auction differs from the Graduate School of Business interaction mechanisms that enable English auction mechanism in its Administration, University of Haifa, transmission of social cues. descending price mechanism. This Israel. Electronic Markets Vol. 15 No 2 159 type of auction became famous as the mechanism used in 2. Environmental factors – these include the auction flowers market in Netherlands. mechanism and rules (Pinker et al. 2003) such as: The rest of this paper is organized as follows. First we initial price, reserved price, bid increment and review previous literature on auctions, social processes in auction ending rule. These factors affect the price, groups and emerging Internet communication and time of bidding and the number of bids. presentation technologies. Next we present our research 3. Social factors – these factors include people who are questions and describe the conceptual and research physically or virtually present. These factors also models. Hypotheses regarding the variables in the model affect the price, the time of bidding and the number are presented and the research method is described. of bids. Social factors are composed of three sub- Following a report of the results of our online groups: simulations we conclude by identifying the experiments’ limitations. Finally, we present the contribution and N Other bidders – the history of other bidders’ propose future research directions. behaviour may provide valuable information. The behaviour may also be perceived as having greater credibility than seller-originating content. For THEORETICAL BACKGROUND example: it was found that herding bias is negatively related to the bid price (Dholakia and Research on auctions Soltysinski 2001). The number of bidders at the auction may also affect bidding behaviour and Auctions are of research interest in the fields of have a negative effect. The ‘winner’s curse’, a term economics, marketing and consumer behaviour. which was coined while analysing loss of profits of Various laboratory experiments and empirical field winners at auctions, is explained by the rules of an studies have been conducted in traditional markets (see auction – the prize goes to whoever has the most Kagel 1995; Kagel and Levin 2002 for a thorough optimistic view of the value of the object being bid review). Internet auctions have been studied following upon. In some cases, this implies that the winner the increase in trade values. Many empirical field studies is the person who has overestimated the most. A collect data available in auction sites to analyse bidding larger number of bidders implies higher winner’s behaviour: In what auctions do bidders participate? How curse (Andreoni and Miller 1995; Kagel and Levin do various auction rules affect the bidding? (for example: 1986). Bapna 2003; Bapna et al. 2001, 2004; Dholakia and N The seller – a large body of empirical studies on Soltysinski 2001; Dholakia et al. 2002; Lucking-Reiley effects of seller’s reputation have been undertaken et al. 2000; Wilcox 2000). Most of these data were in the last few years (for overviews see: Dellarocas collected at eBay, the largest Internet auction site. These 2003; Resnick et al. 2003). It was found that studies relate to various aspects of online auctioning. seller’s past history and feedback rating affect the The following paragraph relates to studies of various probability of the sale as well as the price paid. factors affecting the individual bidder. History and feedback ratings have a measurable Downloaded By: [Schmelich, Volker] At: 20:39 23 March 2010 effect on the auction price (Lucking-Reiley et al. 2000). Determinants of bidding behaviour N Other people – these are people who are not involved directly in the auction but may be the A range of studies identify the determinants of bidding cause for participating in the auction, such as in Internet auctions: price, time of bidding and number family members and other consumers. of bids. These determinants can be classified into three groups according to their source: While this classification identifies the influencing factors, 1. Personal factors – these factors include perceived risk a range of variables measures bidding behaviour: (Ha 2002; Resnick et al. 2003), internal indepen- dent estimates (Chakravarti et al. 2002; Dholakia 1. The decision to participate in a specific auction and Soltysinski 2001), pre-purchase information (Dholakia and Soltysinski 2001; Dholakia et al. search (Ha 2002; Hoyer and Brown 1990), level of 2002; Lucking-Reiley et al. 2000) and the number experience in previous auctions (Dholakia et al. of bidders in a specific auction (Wilcox 2000). 2002; Hayes et al. 1995; Shogren et al. 2000; 2. Times of entry and exit (Bapna 2003; Bapna et al. Wilcox 2000), information and learning (Hoffman 2004; Dholakia et al. 2002). et al. 1995; Jeitschko 1998) and enjoyment and 3. The values of last and winning bids (Bapna 2003; thrill derived from the participation (Herschlag and Bapna et al. 2001, 2004; Dholakia et al. 2002; Zwick 2000). These factors affect the price a bidder Lucking-Reiley et al. 2000; Resnick et al. 2003; is willing to pay. Wilcox 2000). 160 Sheizaf