Framing effects on bidding behavior in experimental first-price sealed-bid money auctions

Abstract

Consumers often face prices that are the sum of two components, for example, an online purchase that includes a stated price and shipping costs. In such cases consumer behavior may be influenced by framing, i.e., how the components are bifurcated. Previous studies have demonstrated the effects of framing and anchoring in auctions. This study examines bidding patterns in a series of first-price sealed-bid experimental money auctions (where the commodity being auctioned is money itself). We hypothesize that bidders’ behavior is affected by the framing of the potential monetary payoff into ``monetary prize” and ``winner’s bonus” components. We find strong evidence of an anchoring effect that influences the strategic behavior of bidders.

Keywords

• anchoring
• framing
• money auction
• consumer behavior.NAKeywords