Understanding overbidding behavior in C2C auctions: an escalation theory perspective

Abstract

With millions of online auctions per day, sites such as eBay have revolutionized how consumers buy and sell goods. Despite the benefits associated with online consumer-to-consumer (C2C) auctions, there can be drawbacks. Consumers who purchase goods in online auctions may get caught up in auction fever, causing them to engage in overbidding, and sometimes leading to what has been referred to as the winner's curse. While several theoretical explanations have been proposed to explain overbidding behavior (OB), there has been little empirical work in this area. Drawing on escalation theory, this study develops and tests a model of the OB exhibited by individuals in online auction settings. Our model posits that certain escalation drivers such as sunk cost (SC), the completion effect (CE), and self-justification affect an individual's willingness to continue bidding (WCB) which, in turn, influences OB. Survey data collected from 250 online auction participants were used to test the model using partial least squares analysis. SC and CE were found to have significant impacts on OB that were either partially or fully mediated by WCB. We also found that competition intensity moderates the relationship between willingness to continue and OB such that when competition is more intense, the relationship becomes even stronger. The implications of these findings for both research and practice are discussed.

Keywords:

• online auctions
• escalation
• overbidding behavior
• competition intensity

Additional information

Notes on contributors

Sang Cheol Park

About the authors

Sang Cheol Park is currently a Postdoctoral Researcher of the Department of Computer Information Systems in the J. Mack Robinson College of Business at Georgia State University. He received his Ph.D. in MIS from Sungkyunkwan University in Korea. His research focuses on the areas of escalation of commitment, IT adoption and diffusion, IOS, cloud computing, knowledge transfer in IT project and so on. His papers have been published in the Computers in Human Behavior, Journal of Computer Information Systems, and Asia Pacific Journal of Information Systems among others.

Mark Keil

Mark Keil is the Board of Advisors Professor of Computer Information Systems in the J. Mack Robinson College of Business at Georgia State University. His research focuses on IT project management and includes work on preventing IT project escalation, identifying and managing IT project risks, and improving IT project status reporting. His interests also include IT implementation and use. He has published more than 100 refereed publications including papers that have appeared in MIS Quarterly, Journal of Management Information Systems, Decision Sciences, Strategic Management Journal, and many other journals. He currently serves on the editorial boards of Information Systems Research, Journal of Management Information Systems, and the Information Systems Journal. He has also served on the editorial boards of MIS Quarterly, Decision Sciences, IEEE Transactions on Engineering Management, and The DATA BASE for Advances in Information Systems.

Jong UK Kim

Jong Uk Kim is currently a Professor at the Business School of Sungkyunkwan University (SKKU) in Korea. He received his Ph.D. in Computer Information Systems from Georgia State University. His research focuses on the areas of Knowledge transfer in IT project, online consumer behavior, IT outsourcing and decision support systems. His papers have been published in Computers in Human Behavior, International Journal of Human–Computer Studies, and Asia Pacific Journal of Information Systems among others.

Gee-Woo Bock

Gee-Woo Bock received his Ph.D. in management engineering from Korea Advanced Institute of Science and Technology (KAIST), Seoul, Korea, in 2001 after 7 years of working at Department of Strategy Planning in Samsung Economic Research Institute. After acquiring his Ph.D., he joined the School of Computing at the National University of Singapore as an Assistant Professor in 2002. He is currently an Associate Professor at the Business School of Sungkyunkwan University (SKKU) in Korea. He has been serving Information and Management as a member of the Board of Editors since 2008, and Asia Pacific Journal of Information Systems as a member of Associate Editor since 2009. His current research interests include knowledge and creativity management, virtual community, online rumors, trust in EC, cloud computing, and augment reality. His papers have been either accepted or published in MIS Quarterly, IEEE Transactions on Engineering Management, Communications of ACM, I&M, International Journal of Electronic Commerce, European Journal of Information Systems, The Data Base: Advances in Information Systems, Journal of Information Science, among others.