Bid-Elicitation Interfaces and Bidding Behavior in Retail Interactive Pricing

Journal of Retailing, Volume 88, Issue 1, March 2012, Pages 131–144

University of Alberta School of Business Research Paper No. 2013-743

Posted: 18 Sep 2014

See all articles by Martin Spann

Martin Spann

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management)

Gerald Haeubl

Independent

Bernd Skiera

University of Frankfurt - Department of Marketing

Martin Bernhardt

Berg & Partner

Date Written: 2011

Abstract

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.

Suggested Citation

Spann, Martin and Haeubl, Gerald and Skiera, Bernd and Bernhardt, Martin, Bid-Elicitation Interfaces and Bidding Behavior in Retail Interactive Pricing (2011). Journal of Retailing, Volume 88, Issue 1, March 2012, Pages 131–144; University of Alberta School of Business Research Paper No. 2013-743. Available at SSRN: https://ssrn.com/abstract=2277987

Martin Spann (Contact Author)

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management) ( email )

Ludwigstr. 28
Munich, 80539
Germany

Gerald Haeubl

Independent

No Address Available

Bernd Skiera

University of Frankfurt - Department of Marketing ( email )

Theodor-Adorno-Platz 4
Frankfurt am Main, 60323
Germany
+49 69 798 34640 (Phone)
+49 69 798 35001 (Fax)

HOME PAGE: http://www.skiera.de

Martin Bernhardt

Berg & Partner ( email )

Am Sandtorkai 77
20457 Hamburg
Germany

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