Feedback, Information Representation and Bidder Behavior in Electronic Auctions

Electronic auctions create a complex decision environment, in which bidders have to submit their bids based on very limited information that they receive as feedback from the auction platform. We argue that the amount of such feedback information, the form in which it is presented, and the context in which this transfer takes place all might influence the way the information is processed, and the decisions that result from receiving this information. The impact of these variables also depends on individual characteristics of the bidders such as their cognitive style. We present an empirical study based on two experiments in which we analyze the impact of these variables on decision outcomes. Results indicate that providing more feedback information can indeed lead to more aggressive (and less rational) bidding behavior and that the framing of information (e.g. whether subjects are told that they ‘won’ or ‘lost’ an auction, or they receive bid data) also strongly influences behavior. There are also significant interactions with individual characteristics, so we conclude that it is necessary to tailor auction platforms specifically to the characteristics of individual bidders.