Abstract

The authors investigate the effect of red backgrounds on willingness-to-pay in auctions and negotiations. Data from eBay auctions and the lab show that a red (vs. blue) background elicits higher bid jumps. By contrast, red (vs. blue) backgrounds decrease price offers in negotiations. An investigation of the underlying process reveals that red color induces aggression through arousal. In addition, the selling mechanism—auction or negotiation—alters the effect of color by focusing individuals on primarily competing against other bidders (in auctions) or against the seller (in negotiations). Specifically, aggression is higher with red (vs. blue or gray) color and, therefore, increases bid jumps in auctions but decreases offers in negotiations.

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