Abstract
Environmental conditions and the interplay of cognitive and affective processes both exert influences on bidding behavior. This paper brings the above together, considering how the (external) auction environment determines the impact of (internal) cognitive and affective processes on bidding behavior, assessed in comparison to the optimal bid. Two aspects of the auction environment were considered, namely auction dynamics (low: first-price sealed-bid auction, high: Dutch auction) and value uncertainty (low, high). In a laboratory experiment, we assess bidders’ cognitive workload and emotional arousal through physiological measurements. We find that higher auction dynamics increase the impact of emotional arousal on bid deviations, but not that of cognitive workload. Higher value uncertainty, conversely, increases the impact of cognitive workload on bid deviations, but not that of emotional arousal. Taken together, the auction environment is a critical factor in understanding the nature of the underlying decision process and its impact on bids.
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