And perhaps ESPN is willing to overpay a bit to keep the late night slot and try to compete with the B10.

This doesn't really make sense, ESPN isn't in a bidding war with the B10 to air pac games in that time slot. ESPN is not in a contract bidding war for the late night time slots, they will be in competition for the late night slot against the B10 a couple of weeks in the season, so why would ESPN be willing to overpay for that?

It would be like you are the only person at an auction and nobody else is there, so do you want to pay more for something nobody else is willing to even buy? Especially if that other person, who isn't there because they bought something more valuable at a different auction. They don't even want to attend the other auction you are at, even for curiosity, so there are no other people there to drive the price up for the item you want.

They only way ESPN and the B10 come into competition is when they actually have their already purchased items on the air at the same time for people to choose. And again, why would someone choose USC/Ohio St over Washington/Oregon? The numbers will probably favor USC/OSU, but if ESPN can put Washington/Oregon on the air for a much cheaper price, even if the viewing numbers are lower, ESPN still wins because they didn't overpay for the product.