Early bidders and opportunists: what’s the difference?

Hi all,

What bidding strategies do bidders adopt in business-to-business auctions? Are they different from the strategies found in business-to-consumer auctions? And why? We have to read the article of Lu, Gupta and van Heck ‘Exploring Bidder Heterogeneity in Multichannel Sequential B2B Auctions’ for this week. I am inspired by this article and I would like to share some main aspects with you. In this blogpost I will thus give you a short summary of this important article.

Prior literature mainly focused on auctions in business-to-consumer and it’s therefore interesting that this article focuses on the business-to-business relations. The authors investigated if there are specific behavioural characteristics across different channels which could be useful for the design and implementation of multichannel auction markets (Lu, Gupta, and van Heck, 2016). Moreover, they investigated the antecedents of bidder’s strategic choices. At first they suggested that bidders with high budget constraints are more likely to choose an early bidding strategy over an opportunistic strategy. Moreover, they supposed that bidders with high budget constraints are more likely to choose a forward-looking, early bidding strategy over a conservative, early bidding strategy. They also investigated if bidders are more likely to choose an opportunistic strategy over an early bidding strategy when the bidders have large dement. The authors explicitly supposed that bidders are more likely to choose an analytical strategy over an early bidding strategy when the bidders have large demand (Lu, Gupta, and van Heck, 2016).

What are the main differences between early bidders and opportunists?

• Early bidders: are likely to be more risk averse and they would rather pay a risk premium to ensure the fulfilment of orders at the beginning of an auction.
• Early bidders: are more sensitive to the change of minimum purchase quantity. Therefore, auctioneers should think of alternative strategies other than increasing the minimum purchase quantity to speed up the market process.

• Opportunists: exhibit a certain degree of gambling behaviour: in order to acquire the product at the best price, they are willing to trade the opportunity to purchase in earlier rounds for more information about market conditions and opponents’ profiles.
• Opportunists: are often bidders with large demand who use an online bidding channel.
• Opportunists: outperform early bidders in surplus extraction.

I would like to share some interesting video with you about the dutch flower auction produced by Erik Olsen (See below)

Kind regards,

Daan Verpalen

Sources:
Exploring Bidder Heterogeneity in Multichannel Sequential B2B Auctions (2016), MIS Quarterly Vol. 40 No. 3, pp. 645-662
https://www.youtube.com/watch?v=zx7buFdpis4 (Olsen, 2014)

http://https://www.youtube.com/watch?v=zx7buFdpis4