Thought-Provoking Thursday: The More You (Don’t) Know

Posted by Maggie McGrath

Despite the shield of anonymity the Internet appears to give us, very little of what we do on the world wide web is actually a secret: Retail websites leave “cookies” that track our web browsing. Gmail scans the content of our emails and creates sidebar-ads accordingly. And for every Craigslist (that obscures its users’ identities), there’s an Ebay encouraging you to link up to your social media profile to your merchant account.

Given this world of (over)sharing, a team of researchers recently sought to find out: how does anonymity — or lack thereof — affect behavior in consumer settings? And specifically, what happens when we’re competing against anonymous consumers for a good we really want?

iStock_mystery womanWe get quite competitive, according to a new paper published in the Journal of Consumer Research by David Norton, Cait Poynor Lamberton and Rebecca Walker Naylor. And while it would seem like a competitive attitude in a retail setting is a good thing, Naylor and her co-authors found getting competitive individually can actually lead to over-bidding in auction-like settings (like Ebay).

In a series of simulated online auctions, Naylor and her colleagues found that when participants went up against bidders they knew nothing about, they consistently bid more aggressively in order to “win” the auction. Yet, this also meant the winners consistently overpaid for the item in question — in one case paying a full 67 percent more than what they would have paid if they had bid against someone with whom they thought they had something in common.

“You want to feel free to compete as hard as you want to. It’s hard to compete against someone who is similar to us,” Naylor said. “It’s associated with liking.”

So what’s a consumer to do, short of asking his fellow bidders to share their life stories? Naylor says it boils down to self-awareness.

“The main takeaway for consumer is: when you’re competing in these online auctions, be aware of the fact that whether you intend to or not, you’re going to feel like the other people in the auction are different from you and that will cause you to compete more aggressively than you’d like,” she said. “Stop and be aware so you don’t end up overbidding.”

Another trick: if you’re looking for a specialty item — say, a stamp or baseball card or something that’s part of a collection — bid not on a general site like Ebay, but instead find a specialty website auctioning off that good. Naylor and her colleagues found that when they directed the study participants to an auction site with a video game focus, it gave the participants clues about who the other bidders were — and in turn, led the participants to bid less aggressively because they assumed their fellow bidders were also video game fans.

“The effect goes away,” Naylor said of bidding wars on specialty websites. “People no longer infer that ambiguous others are dissimilar.”

Of course, if you’re the one doing the selling, you can also use this study as a way to prevent people from ripping you off. If the buyers think they have something in common with you, they’ll be less likely to try to drive down the price — and therefore, your profit.

“If you don’t want buyers to compete aggressively against you as the seller — meaning, ‘Let’s pay as low as possible!’ — and if you think the people bidding on the good are similar to you,” Naylor said, “it may help to show your identity.”