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Reference Prices and Bidder Heterogeneity in Secondary Market Online B2B Auctions

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Listed author(s):
  • Wedad Elmaghraby

    ()

    (Robert H. Smith School of Business, University of Maryland)

  • Anandasivam Gopal

    ()

    (Robert H. Smith School of Business, University of Maryland)

  • Ali Pilehvar

    ()

    (Robert H. Smith School of Business, University of Maryland)

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    Abstract

    Online auction environments provide several sources of information that can be used by bidders to form their bids. One such information set that has been relatively understudied in the literature pertains to reference prices available to the bidder from other concurrent and comparable auctions. In this paper, we study how reference prices from such auctions affect bidding behavior on the focal auction. We also study how the impact of these reference prices is moderated by bidder heterogeneity. Bidders are shown to be influenced by two sets of references prices: internal reference prices from their own historical bidding behavior and external reference prices, formed from other open and just-finished auctions relative to the focal auction. We measure bidder heterogeneity using bidder experience and level of participation in concurrent auctions. Our results show that external reference prices are significantly moderated by bidder heterogeneity. In a departure from current work, we use longitudinal data on auctions and bids in the B2B secondary markets, where goods represent salvage or returned items from big-box retailers and bidders are business buyers. The dataset comprises over 4000 auctions collected from a large liquidator firm in North America and is unique in its comprehensiveness. Our work provides theoretical insights that are complementary to the current set of results from B2C auctions as well as managerial implications for auctioneers in the B2B space.

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    File URL: http://www.netinst.org//Elmaghraby_12-06.pdf
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    Paper provided by NET Institute in its series Working Papers with number 12-06.

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    Length: 36 pages
    Date of creation: Jun 2012
    Date of revision: Sep 2012
    Handle: RePEc:net:wpaper:1206
    Contact details of provider: Web page: http://www.NETinst.org/

    Keywords: Reference Prices; Bidder Heterogeneity; B2B Auctions; Secondary Markets; First Bid; Bidder Experience; Econometric Analysis;

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    1. Peters, Michael & Severinov, Sergei, 2006. "Internet auctions with many traders," Journal of Economic Theory, Elsevier, vol. 130(1), pages 220-245, September.
    2. Uri Simonsohn & Dan Ariely, 2008. "When Rational Sellers Face Nonrational Buyers: Evidence from Herding on eBay," Management Science, INFORMS, vol. 54(9), pages 1624-1637, September.
    3. Anwar, Sajid & McMillan, Robert & Zheng, Mingli, 2006. "Bidding behavior in competing auctions: Evidence from eBay," European Economic Review, Elsevier, vol. 50(2), pages 307-322, February.
    4. Alvin E. Roth & Axel Ockenfels, 2002. "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," American Economic Review, American Economic Association, vol. 92(4), pages 1093-1103, September.
    5. Adaval, Rashmi & Monroe, Kent B, 2002. " Automatic Construction and Use of Contextual Information for Product and Price Evaluations," Journal of Consumer Research, Oxford University Press, vol. 28(4), pages 572-588, March.
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