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Bid-elicitation interfaces and bidding behavior in retail interactive pricing

journal contribution
posted on 2012-03-01, 00:00 authored by M Spann, G Häubl, Bernd SkieraBernd Skiera, M Bernhardt
Advances in information technology have led to a substantial increase in the use of interactive pricing mechanisms, where buyers (i.e., consumers) and sellers (i.e., retailers) enter a formal computer-mediated price-negotiation process during which consumers submit bids for a specific product. This article examines how the interface used for bid elicitation affects bidding behavior and, ultimately, retailer profit. Our focus is on one key aspect of the bid-elicitation interface - how retailers require bidders to articulate their bids. Evidence from four experiments involving economically consequential bids demonstrates that the candidate bid amounts specified by the retailer have a strong influence on bidding behavior, and consequently also on retailer profit. In particular, the level of candidate bid amounts has a positive effect on actual bid amounts, whereas it has a negative impact on the likelihood that a consumer will actually submit a bid. Critically, we show that the former effect can more than offset the latter to cause an increase in retailer profit. We propose and find support for two distinct pathways driving this phenomenon - the candidate bid amounts (1) influence bidders' valuations of the offered product and (2) shape bidders' beliefs about what bid amounts will be successful. Our results highlight the importance of the design of user interfaces for interactive pricing, demonstrating that even seemingly innocuous aspects of interfaces can have a dramatic impact on bidding behavior and retailer profit.

History

Journal

Journal of retailing

Volume

88

Pagination

131-144

Location

Amsterdam, The Netherlands

ISSN

0022-4359

Language

eng

Publication classification

C1.1 Refereed article in a scholarly journal, C Journal article

Copyright notice

2011, New York University

Issue

1

Publisher

Elsevier

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