The authors ought to understand bidding behaviour regarding business-to-business (B2B) auctions, in response to the proliferation of online auctions. In contrast to business-to-consumer market (B2C), transactions in the B2B market involve mutual trust and product and quality requirements. Also, bidders are far more experienced, have different incentives and are subject to budget constraints. The implications of these differences on the bidding behaviour of bidders, are researched by exploring bidding strategies in B2B auctions, how these strategies affect bidders’ economic welfare and how the strategies can be incorporated in the design of these auctions. The Dutch Flower auctions (DFA) has been used to conduct the research, because this market consists of online and offline channels.
In order to capture the different strategies, cluster analysis has been used. The authors consider time of entry in an auction, time of entry on a day, time of exit on a day and frequency of bid on a day. This results in three conservative strategies and two forward-looking strategies, based on the bidders’ time of entry on a day and the time of entry in an action. The lower the value of the time of entry, the higher the urgency of purchase, while a large value suggests a strategic consideration of upcoming auctions. Conservative strategies consist of early bidders, opportunists and analysers, whereas forward-looking strategies include early bidders and opportunists.
The identification of the different strategies challenges the traditional view that bidders change their strategies when they gain experience by the participation in auctions. Because of the discrepancy in observed bidding strategies compared to other literature, it is necessary to understand the fundamental differences between the B2C and B2B markets. The model provided by the authors provides a starting point, because the choices of the bidders are based on specific requirements and constraints.
Auctioneers can use the information on bidders’ strategies to control parameters, such as starting and reserve prices, in order to achieve higher revenues. For example, early bidders and analysers are sensitive to the change of minimum purchase quantity. Thus, auctioneers can potentially customize the daily auction schedule, considering the differences between the conservative and forward-looking strategies.
