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Bidder motives in cause-related auctions

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  • Haruvy, Ernan
  • Popkowski Leszczyc, Peter T.L.

Abstract

We study cause-related auctions where a percentage of the dynamically determined purchase price of an item is donated to charity. Little is known about the effectiveness of such auctions. Bidders who value donations to charity have an incentive to bid more aggressively in such auctions. Regardless of whether they win or not, these bidders can significantly affect prices. The purpose of this paper is to study bidders' willingness to pay a premium in charity auctions and the drivers that affect the charity premium. We use a carefully designed field experiment involving simultaneous pairs of auctions that are identical in all respects but percentage of the proceeds donated to charity. This design gives us the ability to look at bidder choice among auctions based on charitable considerations. We use a mixture model approach to allow for different types of individual preferences. We find that individuals fall into three segments: two altruistic segments and a selfish segment. The altruistic segments, which drive up the charity premium, can be classified as warm glow bidders who derive pleasure from the act of giving and other-regarding bidders who give for selfless reasons. Results show that the difference in donation percentages is the major factor influencing the charitable premium. However, bidders differ considerably in their responses to donation percentages. While other-regarding bidders tend to seek auctions where a greater percentage of revenue is donated to charity, warm glow bidders only contribute when the charity premium is sufficiently low. Thus, managers should focus their marketing efforts on appealing to these different segments, depending on the percentage donated to charity.

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  • Haruvy, Ernan & Popkowski Leszczyc, Peter T.L., 2009. "Bidder motives in cause-related auctions," International Journal of Research in Marketing, Elsevier, vol. 26(4), pages 324-331.
    • Handle: RePEc:eee:ijrema:v:26:y:2009:i:4:p:324-331
    DOI: 10.1016/j.ijresmar.2009.07.001
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    Cited by:

    1. Müller, Sarah S. & Fries, Anne J. & Gedenk, Karen, 2014. "How much to give? — The effect of donation size on tactical and strategic success in cause-related marketing," International Journal of Research in Marketing, Elsevier, vol. 31(2), pages 178-191.
    2. Haruvy, Ernan & Popkowski Leszczyc, Peter T.L., 2016. "Measuring the Impact of Price Guarantees on Bidding in Consumer Online Auctions," Journal of Retailing, Elsevier, vol. 92(1), pages 96-108.
    3. Ernan Haruvy & Peter T. L. Popkowski Leszczyc, 2015. "The Loser’s Bliss in Auctions with Price Externality," Games, MDPI, vol. 6(3), pages 1-23, July.
    4. Chen, Zengxiang & Huang, Yunhui, 2016. "Cause-related marketing is not always less favorable than corporate philanthropy: The moderating role of self-construal," International Journal of Research in Marketing, Elsevier, vol. 33(4), pages 868-880.
    5. Yongfu He & Peter Popkowski Leszczyc, 2013. "The impact of jump bidding in online auctions," Marketing Letters, Springer, vol. 24(4), pages 387-397, December.
    6. Amel Chaabouni & Kaouther Jridi & Fatma Bakini, 2021. "Cause-related marketing: scepticism and warm glow as impacts of donation size on purchase intention," International Review on Public and Nonprofit Marketing, Springer;International Association of Public and Non-Profit Marketing, vol. 18(1), pages 129-150, March.
    7. Dass, Mayukh & Reddy, Srinivas K. & Iacobucci, Dawn, 2014. "A Network Bidder Behavior Model in Online Auctions: A Case of Fine Art Auctions," Journal of Retailing, Elsevier, vol. 90(4), pages 445-462.
    8. Ernan Haruvy & Peter T. L. Popkowski Leszczyc, 2010. "Search and Choice in Online Consumer Auctions," Marketing Science, INFORMS, vol. 29(6), pages 1152-1164, 11-12.
    9. Kim, Ju-Young & Brünner, Tobias & Skiera, Bernd & Natter, Martin, 2014. "A comparison of different pay-per-bid auction formats," International Journal of Research in Marketing, Elsevier, vol. 31(4), pages 368-379.
    10. Jean-Pierre Dubé & Xueming Luo & Zheng Fang, 2015. "Self-Signaling and Prosocial Behavior: a Cause Marketing Mobile Field Experiment," NBER Working Papers 21475, National Bureau of Economic Research, Inc.
    11. Lei Xu & Xiaoning Guo & Yan Liu & Xiaochen Sun & Jie Ji, 2022. "How Does Corporate Charitable Giving Affect Enterprise Innovation? A Literature Review and Research Directions," Sustainability, MDPI, vol. 14(23), pages 1-21, November.
    12. Kopalle, Praveen K. & Krishna, Aradhna & Rajan, Uday & Wang, Yu, 2022. "How does regulatory monitoring of cause marketing affect firm behavior and donations to charity?," International Journal of Research in Marketing, Elsevier, vol. 39(3), pages 947-966.
    13. Martin Spann & Robert Zeithammer & Marco Bertini & Ernan Haruvy & Sandy D. Jap & Oded Koenigsberg & Vincent Mak & Peter Popkowski Leszczyc & Bernd Skiera & Manoj Thomas, 2018. "Beyond Posted Prices: the Past, Present, and Future of Participative Pricing Mechanisms," Customer Needs and Solutions, Springer;Institute for Sustainable Innovation and Growth (iSIG), vol. 5(1), pages 121-136, March.
    14. Xiaojun Fan & Nianqi Deng & Yi Qian & Xuebing Dong, 2022. "Factors Affecting the Effectiveness of Cause-Related Marketing: A Meta-Analysis," Journal of Business Ethics, Springer, vol. 175(2), pages 339-360, January.
    15. Nicole Koschate-Fischer & Isabel V. Huber (née Stefan) & Wayne D. Hoyer, 2016. "When will price increases associated with company donations to charity be perceived as fair?," Journal of the Academy of Marketing Science, Springer, vol. 44(5), pages 608-626, September.
    16. Spann, Martin & Häubl, Gerald & Skiera, Bernd & Bernhardt, Martin, 2012. "Bid-Elicitation Interfaces and Bidding Behavior in Retail Interactive Pricing," Journal of Retailing, Elsevier, vol. 88(1), pages 131-144.
    17. Jean-Pierre Dubé & Xueming Luo & Zheng Fang, 2017. "Self-Signaling and Prosocial Behavior: A Cause Marketing Experiment," Marketing Science, INFORMS, vol. 36(2), pages 140-156, March.

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