Truthful Auctions

Why second price is first rate

An interactive lesson with 6 steps, about 5 minutes: you predict, drag and solve, with instant feedback on every answer. It runs in your browser and needs JavaScript.

What you’ll learn

• First-price auctions encourage bid shading.
• In a second-price (Vickrey) auction, the winner pays the second-highest bid.
• Bidding your true value is a dominant strategy in a second-price auction.

Steps

1. Two sealed-bid auctions
2. Is honesty the best policy?
3. What does the winner pay?
4. The Dutch auction
5. Which raises more money?
6. Selling the airwaves