Key Takeaway: A new study shows that temperature affects consumers’ willingness to pay and that these effects are contingent on whether the company is using an auction or a negotiation sales approach.
Chicago, June 17, 2019 — Researchers from Florida International University and Virginia Tech University published a new paper in the Journal of Marketing, which finds that in auctions, higher temperatures increase consumers’ willingness to pay. However, in negotiations, higher temperatures lower willingness to pay.
The study, forthcoming in the July issue of the Journal of Marketing titled “The Role of Ambient Temperature in Influencing Willingness-to-Pay in Auctions and Negotiations,” is authored by Jayati Sinha and Rajesh Bagchi.
Temperature’s
effects on human physiology have been well-studied, but its effects on
decision-making are still relatively unknown. A new study in the Journal of Marketing studies the effect
of ambient temperature on buyers’ willingness to pay in auctions and
negotiations. The research team finds that in auctions, higher temperatures
increase consumers’ willingness to pay. However, in negotiations, a different
pattern of effects emerges: Higher temperatures lower willingness to pay. This
occurs because hotter temperatures induce aggression, which elicits a different
pattern of effects in auctions than it does in negotiations. Sinha explains, “In
auctions, an aggressive bidder attempts to ‘win’ the auction by outbidding
other competitors, and, therefore, bids higher. In contrast, in negotiations,
an aggressive negotiator attempts to ‘get the best deal possible’ from the
seller, and therefore, offers lower bids.”
This research has important implications for marketers. First, the use of higher
ambient temperatures in auctions will induce higher bids, increasing seller
profits. Higher temperatures have a detrimental effect on negotiators—they
lower willingness to pay for buyers and could lead to more protracted
negotiations and to lower agreement likelihoods. Second, while auctioneers and
negotiators can alter ambient temperatures to influence willingness to pay,
temperatures also vary naturally. For auctioneers, perhaps conducting auctions
during warmer summer (vs. moderate) months may be more beneficial. In contrast, those offering negotiable online prices
should offer more products for sale during the seasons when temperature is
moderate. Likewise, consumers could also dress appropriately to ward off the
effects of temperatures.
At the same time, because discomfort and hostile aggression underlie the effects there may be other ways to induce discomfort to get the same effects in auctions—e.g., via seating, noise, crowding. All of these approaches can incite aggression, which could potentially have similar effects. Finally, while the study is about price negotiations, concession making is necessary in non-price negotiations too, such as when distributing tasks/work-place responsibilities. With higher temperatures, people may be less likely to concede and be more aggressive, which may lead to more disagreements overall. Moderate temperatures, on the other hand, may lead to more integrative decision-making.
Bagchi notes “These effects may be even more pronounced in developing economies, such as India and China, and parts of Africa. In these marketplaces, consumers do not always have access to heating and cooling and majority of the exchanges occur via negotiations and auctions. It may also be interesting to assess if our effects might emerge in outdoor settings—such as when consumers negotiate prices of cars or the purchase price of a rug on the streets of Turkey and Egypt, or when buying vegetables from a street vendor in Nigeria.”
Full article and author contact information available at: https://journals.sagepub.com/doi/full/10.1177/0022242919841595
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