To bid or not to bid: Drivers of bidding behavior in electronic reverse auctions

Electronic reverse auctions (eRAs) are a popular tool used in sourcing and business research. However, the complexity of decisions made during this type of auction is not yet fully understood. The authors use data from a published laboratory experiment that had examined the impact of eRA auction configuration on buyer price and supplier perceptions of opportunism. In the present study, the authors analyzed data from the 11,882 time-interval observations and 2,549 bids submitted by suppliers to explore the factors that affect suppliers' decisions to submit bids in eRAs. The effects of supplier characteristics, bidding history and experience, auction configuration, and timing on the propensity to bid at a specific point in time during the eRA are estimated utilizing continuous time hazard rate analysis techniques. Our results indicate that the supplier's need for cognition and number of prior auction failures, online auction configuration, and the rank status of a supplier's bid at a given point in time all significantly affect the propensity to submit a bid. Also, if suppliers have previously submitted many bids in the online auction, they tend to submit more subsequent bids, suggesting an escalation of commitment dynamic that may underlie the potential for a bidding frenzy.