An Integrated Model for Bidding Behavior in Internet Auctions: Whether, Who, When, and how Much

Abstract

The authors develop a general parametric modeling framework for bidding behavior in Internet auctions. Toward this end, they incorporate four key components of the bidding process under their framework: whether people bid on an auction, (if so) who bids, when they bid, and how much they bid over the entire sequence of bids in an auction. This integrated framework is based on a single, latent, time-varying construct of consumer willingness to bid, which bidders have and update for a particular auction item over the course of the auction duration. Using a database of notebook auctions from one of the largest Internet auction sites in Korea, the authors demonstrate that this general (yet parsimonious) model captures the key behavioral aspects of bidding behavior. Furthermore, the authors provide a valuable tool for managers at auction sites to conduct their customer relationship management efforts, which require them to evaluate the ”goodness” of the listed auction items (whether people bid) and the goodness of the potential bidders (who bids, when they bid, and how much they bid).