Anyone who’s participated in an auction can tell you how exhilarating it can be. In a setting where participants compete for goods under a time limit, items are far more alluring than usual. When bidders get swept up in their excitement and desire to win these items, it kick starts an aggressive frenzy of bidding wars. This is auction fever. There are a few reasons for this phenomenon.
If consumers wanted to have a straightforward shopping experience, they would choose a sale with fixed prices. Auctions provide them the thrill of battling for bargains or for rare or unique goods. A big pool of bidders will ignite a higher degree of rivalry and engagement.
The Endowment Effect
The threat of the potential loss of a coveted item is no joke. Bidders put strong emotion behind obtaining items they’ve bid on. This is because a pseudo-endowment effect occurs when they reach the highest bid. Bidders start imagining that item as won, thus, their own. This false sense of ownership causes us to believe that the item is more valuable than its objective market value. Online or on-site, this always holds true as a driving factor for intense bidding wars.
Countdowns emphasize the small window of opportunity one has to obtain the item they are pining over. Emphasis on this prompts anxiousness that pushes the escalation of bids.
In economics and decision theory, loss aversion refers to people’s tendency to value avoiding losses more than the joy of winning. There is more satisfaction in driving the bid up in order to win than losing to a smaller bid even if that means driving the item past its objective market value.
Law of Scarcity
This is the main driving factor for auction fever. High-pressure situations for sales cultivate heightened desires in consumers. The items at auction are seen as limited resources since many are competing for them. These items may also be rare or unique, which adds to the sense that they are even harder to obtain. Restrictive time pressures also greatly reinforce this idea.
The auction method is inherently geared to push our emotional buttons. Competitive arousal, the pseudo-endowment effect, time pressures, loss aversion and the law of scarcity- all of this comes together to create the perfect storm for an aggressive, adrenaline pumping shopping experience that triggers auction fever.
Check out Part 2 of our Auction Fever series, 5 Tips for Harnessing Auction Fever for Online Auctions
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