Does it Pay Off to Bid Aggressively? An Empirical Study

In this research, we empirically investigate the payoff of aggressive bidding in an online auction. To address our research question, we use a unique and very rich dataset containing actual market transaction data for approximately 7,000 pay-per-bid auctions. Our research design allows us to isolate the impact of bidding aggressively in an attempt to signal a high valuation on the probability to win an auction. In particular, we analyze more than 600,000 bids placed manually by approximately 2,600 distinct auction participants. The strong and significantly negative effect of aggressive bidding on the likelihood of winning an auction revealed by our analysis suggests that an aggressive bidding strategy is not beneficial in increasing the chances of winning an online auction