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

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.