Which bidding strategy is likely to lead to higher costs for the winning bidder in a first-price auction?

In a first-price auction, the winning bidder pays the amount they bid, making the bidding strategy employed crucial for cost management. When a bidder adopts the strategy of overbidding to secure a win, this approach can result in higher costs. Overbidding occurs when a bidder places a bid significantly higher than what they may have needed to outbid competitors or win the auction.

By aiming for a comfortable margin above competitors, the bidder risks paying more than necessary. Since they pay exactly what they bid in a first-price auction, any excess in the bid compared to competitors may lead to inflated costs. Conversely, strategies like bidding just enough to outbid or lowering the bid focus on securing a position at a lower cost, and cooperating with other bidders inherently involves shared interests that can lead to reduced expenses overall. Thus, the strategy of overbidding is the most likely to result in higher expenses for the winning bidder in this auction format.