Bidding Advice
High-stakes bidding
is complex, and it pays to design a bidding strategy that pays careful
attention to auction rules, even unintended rules. When to outbid, when to outfox? I do not think it is
enough to attempt to win those assets in an auction which the client considers
high priority. Simply outbidding rivals may well lead to paying too
much (see the winner's curse link below). As much as possible,
my goal is to win what the client wants to win, while keeping as much money
as possible still in the client's wallet. More particularly, I seek
to find ways to convince rival bidders to cease competing below their willingness
to pay for assets we want to win, so that we win them at prices that are
still bargains. This is only possible by a strategy which is a detailed
reaction to the particular rules, and the nature of rivals' behavior.
It would oversimplify to say that designing auctions and advising bidders
are opposite sides of the same coin, but there is definitely a sense in
which experience with one assists in the ability to do the other. As
an auction designer, I try to limit as much as possible the game-playing
bidders can do, within goals of efficient and/or high-revenue auction outcomes.
When advising bidders, I find every loophole and unintended consequence
within the rules, and in unanticipated gaps in the rules, and see how they
might be utilized to the advantage of my client.
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