Numerous research papers have been written regarding differences between live and online auctions. Likewise, auctioneers are regularly discussing if their next auction should be live or online.
One such paper, published September 19, 2012, was titled:
- “Thinking or Feeling the Risk in Online Auctions: The Effects of Priming Auction, Outcomes and the Dual System on Risk Perception and Amount Bid“ published by Yael Steinhart, Michael A. Kamins, David Mazursky and Avi Noy.
First, some terms:
- Cognitive auction bidding is defined as goal-based, deliberate and rule governed.
- Affective auction bidding is defined as spontaneous, intuitive and emotion based.
The conclusions of many of these studies find that for the seller, the live auction venue is appropriate for certain types of items, and the online auction venue is appropriate for a certain types of items.
What research suggests, generally speaking, is that live auction sellers benefit from the bidders’ fear of loss, where online auction sellers benefit from the bidders’ determination to win. And, we us the words “fear” and “determination” with purpose, as live auctions tend to generate affective bidding while online auctions tend to generate cognitive bidding.
To quote Steinhart, Kamins, Mazursky and Noy, their conclusions are as follows:
- “The results of our findings aside from suggesting how to use cues to sell a particular lot offered for sale have broader implications.
- They imply that market makers (e.g., eBay, Christie‘s, Sotheby‘s) who make their money on a commission basis as a function of the number of items sold, should consider the match between the product they typically sell and the appropriate auction venue, since the venue may differentially trigger cognitive versus emotional bidding which impacts the relative importance of risk perceptions regarding the potential of losing or winning the auction.
- For example, live auctions, by their very nature involve intensive social interaction with other bidders and provide a generally socially directed environment which has the potential to lead to emotional bidding where the goal to vanquish another is more likely to go hand in hand with the focus of not losing the item.
- As our research has shown, products which one-of-a-kind (e.g., antiques, artwork, bric-a-brac, custom jewelry) may be best suited to such a live selling context since the potential of losing such an item may loom large especially if it is unlikely to come up for auction again (i.e., Sotheby‘s and Christie‘s are famous for selling the works of unique paintings from well known artists).
- Alternatively, identical products which come up for sale often (e.g., CD‘s of popular singers, electronic hardware), may be better suited for sale online in a more socially restricted emotional context, where winning is the focus.”
This particular study also noted that “Cognitive and affective systems have differential effects on consumers‘ perceptions of the risk of losing and therefore on the price they are willing to pay for a given product. When the affective system was activated, consumers generally paid higher prices when primed to focus on a possible loss rather than a possible win. On the other hand, when the cognitive system was made more accessible, consumers paid higher prices when they focused on the possibility of winning rather than losing.”
What this seems to suggest is that a live auction should (and intrinsically does) focus more so on the risk of loss (affective bidding) where the online auction should (and intrinsically does) focus more so on the possibility of winning (cognitive bidding.)
However, can a live auction benefit from cognitive bidding? Can an online auction benefit from affective bidding? The answers to both questions is, “Yes!” This study did some experiments which suggest a pattern.
In an inherently cognitive system (an online auction) the winning orientation produced a mean price of $4.29 and a losing orientation produced a mean price of $3.45. Contrasty, in an inherently affective system (a live auction) the winning orientation produced a mean price of $4.30 and a losing orientation produced a mean price of $6.31.
What does this mean?
This research suggests the cognitive component of the online and live auction produces nearly identical prices. However, the affective component of the live auction is nearly twice that of an online auction. In other words, when bidders are determined to win, the live and online auction produce similar results, but when bidders fear loss, the live auction is far superior.
In this seemingly delicate balance, it appears the less bidders think clearly and logically, the more they bid. And, while an online auction can benefit from both logical and emotional bidding, a live auction can capitalize on emotion to a greater extent, while still benefiting from logic.
Maybe the solution is to have both a live and online auction? Actually, research suggests that one or the other is better than both:
In summary, a live auction primarily maximizes prices as a result of fear of loss — to a much greater extent than an online auction maximizes prices as a result of a determination to win. So, maybe the question is, “How much of the other bidder perspective can each platform accommodate?” This research found similarly that a live auction benefits from cognitive bidding to a (slightly) greater extent than an online auction benefits from affective bidding.
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.facebook.com/mbauctioneer. He serves as Adjunct Faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.