Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
Consumers bidding for items on online auction sites exhibit a peculiar shopping behavior that hinders their ability to get a good deal, finds a new study of digital consumer behavior.
Consumers bidding for items on eBay or other online auction sites exhibit a peculiar shopping behavior that hinders their ability to get a good deal on a desired item, finds a new study of digital consumer behavior by a University at Buffalo researcher.
Paul Dholakia, assistant professor of marketing in the University at Buffalo School of Management, analyzed bids placed for thousands of items in different product categories on eBay over a three-week period. He found that consumers tended to gravitate toward items that have one or more existing bids, while ignoring comparable or even superior "unbid for" items from the same product categories.
Dholakia says that bidders often succumb to a form of online peer pressure when choosing items to bid on. The behavior occurs, Dholakia explains, because online bidders are unable to thoroughly evaluate an item as they would at an off-line auction or retail environment; nor are they able to assess the trustworthiness of a seller face-to-face. So, lacking key informational cues about an item, online bidders are more prone to be influenced by the behavior of other bidders: They perceive existing bids to be evidence of an item`s quality, making it worthy of their own bid, Dholakia contends.
"The study illustrates the important role trust plays in the digital marketplace," he says. "When sellers are individuals without recognizable affiliation, a product`s name brand, features and price are less important, and the seller`s trustworthiness is a more important consideration."
Dholakia believes that cluttered design of online auction sites also contributes to the herd behavior. "Most online auctions overwhelm bidders with hundreds of choices in a relatively unorganized setting," he says, "so consumers use existing bids as a criterion for screening items and navigating an auction site."