Studies of online auctions show how human behaviour affects an item’s eventual sale price. In the past, says Dr Yongfu He, a lecturer in marketing in the Monash University Faculty of Business and Economics, economic and mathematical models were used to predict consumer behaviour. But such models oversimplify the motivations for human behaviour and assume bidders are coolly driven by price alone. “In reality, if people get carried away in the competitive bidding process, they don’t really care if it’s a few dollars more,” Dr He says. Her research in the Monash Behavioural Research Laboratory shows that two influential elements of online auctions are a reference price, such as a “Buy It Now” price, and jump bidding, the strategy of bidding in dramatic increments to shock competitors out of contention.
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