An (optimised) bidding strategy is a plan of actions that provides for each decision falling due within the auction procedure the optimal action regarding the bidder’s expected pay-off.

The bidding strategy is optimized with respect to a bidder’s individual costs and hence a mapping from individual costs to the optimal bid. Finally, an optimized bidding strategy is individual for each bidder. Beyond, the optimized bidding strategy may depend on the bidder’s beliefs about competition.

Optimized bidding strategies can be further categorized as follows:

A (weakly) dominant bidding strategy is a plan of actions that is optimal for the individual bidder regarding his expected pay-off independent of what his competitors do.

An equilibrium bidding strategy is part of an equilibrium strategy combination of all participants. In equilibrium, a sole participant can never benefit by deviating from his individual equilibrium bidding strategy with respect to an increased expected pay-off under the assumption that all other participants maintain their equilibrium bidding strategy, i.e. an equilibrium bidding strategy is the best response on the competitor’s equilibrium bidding behaviour.

The existence of (weakly) dominant or (unique) equilibrium bidding strategies in an auction depends on the auction format as well as existing framework and market conditions.