DEFINITION of ‘Bidder’
The party offering to buy an asset from a seller at a specific price. A bidder can be an individual or organization, and the potential purchase can be part of a multiparty transaction or an auction. In most cases, the party selling the asset chooses the bidder who offers the highest price.
BREAKING DOWN ‘Bidder’
Bidders are an essential component of a functioning market. By indicating the amount they are willing to pay for something, bidders signal to the market whether demand is increasing or decreasing. High demand may prompt more sellers to enter the market, and can increase the price that sellers are able to garner.
In the case of the stock market, investors bid on how much they are willing to pay for a company’s shares. Share price volatility depends on the number of buyers and sellers looking to conduct a transaction, with the presence of more buyers than sellers often leading to an increase in price.
The market for mergers and acquisitions is also a bidding market. Companies negotiate how much they are willing to pay to acquire another business, which in turn can reject bids if they find the price too low.