Pre-Counterfactuals and Anticipated Emotions: Factors Affecting the First Bid in Name-Your-Own-Price Auctions

Kuo-Chuan Chu,Kyoung-Nan Kwon

doi:10.5539/res.v6n1p34

Abstract

This research examines the effects of pre-counterfactual thinking and anticipated emotions on the amount of the first bid placed in Name-Your-Own-Price auctions. The results of Study 1 indicate that upward counterfactuals are elicited more than downward counterfactuals in response to both accepted and rejected bids. Study 2 investigates the effect of imagination of upward counterfactual thinking on the first bid. The results indicate that upward pre-counterfactual thinking about an accepted bid results in anticipated regret, which increases the amount of the first bid; however, the amount is not influenced by anticipated disappointment resulting from pre-counterfactual thinking of a rejected bid.

Highlights

Interactive pricing mechanisms, in which both buyers and sellers actively participate in the price-generating process, have become increasingly popular in online markets
The findings of Study 1 indicate that the counterfactual thoughts occurring after both accepted and rejected bids are upward in direction, which is consistent with the findings of previous studies (Galinsky et al, 2002; Markman et al, 1993)
One significant issue in counterfactual thinking is that upward counterfactual thought often results in a high level of negative emotions because such thoughts focus on imagined outcomes that are better than the outcome obtained (Gleicher et al, 1990; McConnell et al, 2000; Roese, 1997)

Summary

Introduction

Interactive pricing mechanisms, in which both buyers and sellers actively participate in the price-generating process, have become increasingly popular in online markets. In a seller’s auction, the buyers compete against each other for the bidding item from a seller and the winner is the one with the highest bid. Introduced by Priceline.com, this new and interesting online transaction mode of NYOP has become a popular bidding system that provides savings to consumers and additional revenues to suppliers (Jones et al, 2000). Different from buyers in seller’s auctions, buyers in NYOP auctions bid for a product against an unrevealed threshold price determined by the seller. NYOP is a reverse auction that allows sellers to compete for the bid submitted by a buyer, while in traditional auctions buyers compete for a product by increasing its start price set by the seller (e.g., eBay.com) (Tassabehji et al, 2006). The most appealing aspect of the NYOP auction is that buyers, rather than the seller, decide the price for a product or service (Chernev, 2003)

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Conclusion