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Measuring Emotions in Electronic Auctions
  • Marc Adam, Karlsruhe Institute of Technology

Auctions are nowadays a popular and frequently employed market mechanism in electronic markets. In economic literature, the success of electronic auctions has been largely attributed to the reduction of transaction costs, the large number of potential buyers, and the independence of time and space. However, an additional explanation for the success of electronic markets, and in particular Internet consumer auctions, is the hedonic or emotional value bidders derive from auction participation. The emotionality bidders experience in Internet auctions confronts a market engineer of electronic markets with two important challenges, regarding both the auction mechanism design and the user interface design. First, how can an auction system induce emotionality and, thus, attract excitement oriented consumers? Second, what is the impact of emotionality on bidding behavior? In order to approach both challenges, a market engineer needs to be able to actually measure emotions in electronic auctions. This thesis develops a structured methodology that allows to systematically analyze emotions in electronic auctions. It provides a unified framework for emotional bidding in electronic auctions, which comprises the bidders' processes of cognitive reasoning and emotional processing. Moreover, a methodology for measuring physiological correlates of human emotional processing in economic experiments is proposed: physioeconomics. Physioeconomics extends existing methods of experimental economics by measuring autonomic nervous system activity using well-established psychophysiological methodology in order to gain a profound understanding of human economic decision-making. Based on the framework for emotional bidding and the methodology of physioeconomics, this thesis describes how emotions and their impact can be measured in electronic ascending auctions, and provides a proof-of-concept study. Moreover, an experiment was conducted in order to analyze the impact of clock speeds on the bidders' emotional processing and behavior in Dutch auctions. Several previous experimental studies have discovered that the sellers' revenues in Dutch auctions depend on the speed at which the standing price is decreased: Slow Dutch auctions generally yield higher revenues than fast Dutch auctions. This effect is commonly explained by the conjecture that participants experience a ``utility of suspense'' which is stronger in fast Dutch auctions. The experiment in this thesis provides physiological evidence for a utility of suspense in Dutch auctions, further characterizes the elicited emotional state bidders experience, and investigates how this emotional state is reflected in bidding behavior. Furthermore, characteristic patterns of bidders' emotional processing in Dutch auctions are identified. It is shown (1) that inducing a bidder with an independent private valuation directly influences her level of arousal, and (2) that the heart rate of the winning bidder momentarily decreases about two seconds before she places her bid.

Publication Date
Summer June 25, 2010
KIT Scientific Publishing
Citation Information
Marc Adam. Measuring Emotions in Electronic Auctions. Karlsruhe, Germany(2010)
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