Estimating the Impact of In-Auction Promotional Messages on Auction Prices

Auctioneers often issue promotional messages during auctions conducted live and online. We propose and test a model of the impact of these messages on final auction prices. The model examines messages’ direct price impact, which affects valuations of existing bidders, and their indirect price impact, through the two mediators of affecting new bidder entry and jump bidding. This model also examines how the auctioneer’s message-sending decisions are influenced by past bidding and past message-sending in the auction. We create sub-models of these bidder and auctioneer decisions, which allow dynamic auction decisions that change at each bid (for bidders) or bid interval (for the auctioneer), and link these sub-models to a sub-model of the final auction price. We also distinguish between informational messages that convey information about the item’s attributes and bidding messages that focus on bidder actions particular to auctions. The proposed model is supported when tested on data from real time Internet auctions of Air France airline tickets. A counterfactual analysis provides insights into how changing the frequency or placement of messages can increase or decrease the predicted auction price.