Anchoring and transaction utility: evidence from on-line auctions

Abstract

This article presents empirical evidence that people use anchoring to form their valuation of an object. Using data from the on-line auction Bidz.com, we found that people bid more for an item with a higher posted ‘buy now’ price than for an identical item with the lower posted ‘buy now’ price.

Acknowledgement

We are especially grateful to Roger Gordon and Yan Chen for their advice and numerous detailed comments.

Notes

¹ One of the actual descriptions: ‘A brand new sapphire-diamond solitaire lady's ring is made in Solid 10kt White Gold with Yellow Gold accents and has a prong set marquise Natural Sapphire with growth patterns in rich midnight blue and an est. 0.72 carats plus 6 channel set genuine diamonds in tapered baguettes in an overall I1 to I2 clarity I-J color grade and a total est. 0.18 carats. The ring weighs approx. 3.80 grams, in a finger ring size 7 which can be resized by your local jeweler and measures 10.25 mm wide across the top of the ring. All measurements are approximate. Buy now price $900.00 ≪photo≫.’