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Big Bids and Bidder Behavior in Uniform Price Auctions: Evidence from Peer-to-Peer Loan Markets

Author

Listed:
  • Garrett T. Senney

    (Office of the Comptroller of the Currency)

  • Jonathan R. Lhost

    (Lawrence University)

Abstract

We investigate the effect of big bids on uniform price auctions with the use of data from peer-to-peer loan auctions. Following a big bid by a prospective lender, subsequent bidders are less likely to enter the auction, and those that do enter tend to bid higher interest rates. We show that bidders are not reacting to the identity of the big bidder—just to the bigness of the bid. Additionally, we find that auctions with a big bid receive fewer bids overall, but these loan requests are still more likely to get funded and to have higher interest rates. These results have strong implications for maximizing a seller’s revenue (or minimizing a buyer’s cost in a procurement auction) and the allocative efficiency in uniform price auctions.

Suggested Citation

  • Garrett T. Senney & Jonathan R. Lhost, 2023. "Big Bids and Bidder Behavior in Uniform Price Auctions: Evidence from Peer-to-Peer Loan Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 63(3), pages 349-372, November.
    • Handle: RePEc:kap:revind:v:63:y:2023:i:3:d:10.1007_s11151-023-09912-2
    DOI: 10.1007/s11151-023-09912-2
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    Cited by:

    1. Garrett T. Senney & Jonathan R. Lhost, 2024. "Balancing Attraction and Risk Revelation: The Optimal Reservation Price in Peer-to-Peer Loan Auctions," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(2), pages 289-314, March.

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    More about this item

    Keywords

    Auctions; Bidding; Crowdfunding; Peer-to-peer lending;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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