Bidding strategies for real‐life small loan auctions

Bidding strategies for real‐life small loan auctions

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Article ID: iaor20113137
Volume: 51
Issue: 1
Start Page Number: 31
End Page Number: 41
Publication Date: Apr 2011
Journal: Decision Support Systems
Authors: , , ,
Abstract:

We define and identify bidding strategies in real‐life small loan auctions (Prosper.com). In such auctions, lenders bid for borrowers' loan listings and the winners get to fund the loan at an interest rate determined by the auction. The exceptionally large empirical database provided by Prosper.com offers a unique opportunity to test and further develop the theory of online auctions. This study shows that bidding behavior is not homogeneous among bidders, as the traditional auction theory suggests. Instead, bidders use many different bidding strategies. Moreover, learning and bidders' consistency over time in different auctions is studied.

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