ABSTRACT
The literature on competitive bidding can be divided into two categories: theoretical and applied. It is assumed that one's opponents are rational decision makers who seek to maximize a known payoff function. This assumption is used to predict how these opponents will behave. The game theory approach to competitive bidding attempts to characterize equilibrium solutions. In order to reach these results, it must be assumed that each player has a payoff function which is known by all. The applied bidding literature, rather than characterizing equilibrium conditions, deals with some of the practical problems facing a competitive bidder. The applied literature views the auction sale from a single bidder's point of view, and suggests methods for making successful bids. One major difficulty with the bidding literature, both theoretical and applied, is the inherent bias in the evaluation of objects won by a bidder.
