What is a common behavior observed in bidders during first-price auctions?

In first-price auctions, it is common for bidders to inflate their bids based on their perceptions of the competition. This behavior stems from the strategic nature of first-price auctions, where the highest bidder wins but pays the amount they bid. Bidders are aware that they need to secure a higher bid than their rivals to win the auction, which drives them to estimate what their competitors might be willing to bid.

As a result, bidders might choose to increase their bids beyond their true valuation of the item in order to ensure victory over perceived competitive offers. This inflation can be influenced by several factors, including the bidder's previous experience, historical bid data, and overall auction dynamics. Unlike second-price auctions, where bidders can benefit from bidding lower than their true value while still having a chance to win for the second-highest bid, first-price auction bidders must carefully consider their strategy based on their expectations of others' bidding behavior.