My personal Prosper bidding philosophy

A few caveats:
a)my strategies/goals/targeted risk & returns are likely to differ from yours, even if we're both perfectly rational -- such things can be matters of heterogeneous tastes rather than right or wrong

b)hopefully, the benefit of stimulating discussion and having more efficient lenders, will outweigh the potentially increased competition from posting about this

c)In this context, I don't really care about the oodles of formal mathematical proofs of this type of auction optimality or that type of auction that economists love to bandy about -- I'm hoping to stimulate discussion of real-world/prosper-specific issues

1.Bidding early on insta-funding loan:

a)only valuable insofar as
i)you worry others will fund so much of the loan before you realize it that you get less than your desired allocation.
ii)you suspect that by bidding early, you make it more likely that the loan will be fully funded early/fully fund at all -- that is, maybe no one's going to bother bidding on a $10,000 loan that's only been funded to the tune of $100, and is expiring in 3 hours. In a truly efficient market, this wouldn't be a big issue, as everyone who likes the loans bid-snipes it at the last possible moment, easily funding it fully. (Bid sniping is the practice of automating your bid on an online auction to go in at the last possible second; typically accomplished through various websites like hammersnipe.com when one bids on ebay)
iii)you think the borrower might withdraw the loan opportunity and not relist/relist at a crappier rate, and you want to make it more likely that it closes at the current rate. (this could backfire -- say lots of people bid early on a really nice loan but not quite to completion -- maybe borrower thinks, hey, let me withdraw and relist -- clearly I listed at too hi a price)

b)bad insofar as:
i)your opportunity cost in terms of other, sweeter loans that may pop up in the interim
ii)you think that the rate could be even better if the loan closes w/o being fully funded, and the borrower relists.

c)handwavey analysis: If you're bidding on a really sweet (hi return) loan, the opportunity cost of tying up your funds early probably isn't insanely high -- how likely is it that another super-sweet loan will pop up? Even if we're talking an OK loan, as long as you have a fair amount of capital to lend, and you still have a lot of time to dole it out, probably OK to bid early and make your life easier/guarantee you catch a piece of the loan. However, if you only have a little bit of money left to lend, and the loan you're looking at is looking fairly generic in terms of attractiveness, maybe it makes more sense to delay bidding...

2.abbreviated thoughts on non-insta-funding loans
some differences include:

a)ability to have rates bid down: may make early bidding more advantageous (as you are then the last person to get bid down). However, in my book, I want the juiciest loans anyway, so any too-attractive loan that might get bid down is already not appropriate for me.

b)perhaps greater role of signalling to other bidders -- that is, if no one bids on a large loan, no one will want to be the first to bid, tying up their money w/o any guarantee that the loan will close. In practice, if the loan is nice enough, people will bid early anyway because they don't want to worry about missing it, and the opportunity cost of tying up your capital until loan closes is small in comparison. As always, the flip side to this is that bids frequently beget other bids, increasing competition/desirability of loan in eyes of others.

c)the ability of borrowers to close loans early once they're satisfied w/ rates being offered, as long as full funding occurs -- another reason to get in slightly earlier.

Other schools of thought on prosper.com bidding?