Negotiation research you can use: Inoculate yourself against auction fever

By on / Negotiation Skills

Those who participate regularly in auctions have likely observed the phenomenon of “auction fever” firsthand—or caught the fever themselves. Defined by London Business School professor Gillian Ku and her colleagues as “the emotionally charged and frantic behavior of auction participants that can result in overbidding,” auction fever has been observed in competitive bidding realms ranging from eBay auctions to government and manufacturing procurement contracts to fine-art auctions. This emotionally driven behavior often doesn’t make much sense: In a 2011 study by Ohio State University researcher Matthew Jones, for example, 41% of people bidding on eBay for Amazon.com gift cards paid more than the cards’ face value.

What causes auction fever? Research on “competitive arousal” has found that prevalent features of auctions, including rivalry, time pressure, and the presence of an audience, fuel arousal—a physiological and emotional state of attentive alertness marked by a rapid heartbeat, sweating, and other symptoms. Arousal in turn motivates a desire to win, sometimes even if this means incurring a financial loss.

In a new study, University of Newcastle researcher Marc T.P. Adam examined whether arousal unrelated to the auction itself could also be a driver of auction fever. In one experiment, participants were fitted with electrodes to monitor their heart rate. Participants in the high-arousal condition then engaged in a timed symbol-matching task on the computer in competition with others. By contrast, participants in the low-arousal condition listened to soothing “spa” music while completing a much easier matching task with little time pressure.

Next, all the participants engaged in two auctions with two other bidders each for jars of coins of unknown value; winners were paid the true value of the jar minus the amount they bid. The results showed that the high-arousal participants were significantly more likely to overbid for the jars than the low-arousal participants. These results were replicated in other experiments with other arousal inductions, such as viewing innocuous images (stationery, pebbles, Q-tips, etc.) in the low-arousal condition and emotionally charged images (fire, a shark, a kissing couple, etc.) in the high-arousal condition. Interestingly, the results of one of the experiments revealed that participants were unaware of the impact of “incidental arousal”— that is, arousal not triggered by the auction itself—on their bidding.

When preparing to partake in auctions, keep in mind that emotional arousal, whether incited by the competition itself or by irrelevant factors (such as an argument with a relative or the stress of running late), could lead you to overbid. You should be able to avoid becoming the next victim of auction fever by determining your maximum bid in advance and avoiding stressors and other triggers that could elevate your heart rate before and during the auction.

Resource: “Auction Fever: The Unrecognized Effects of Incidental Arousal,” by Marc T.P. Adam, Gillian Ku, and Ewa Lux. Journal of Experimental Social Psychology, 2018.

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