A type of sequential second price auction in which an auctioneer directs participants to
beat the current, standing bid. New bids must increase the current bid by a predefined increment. The auction ends when no participant is willing to outbid the current standing bid.
Then, the participant who placed the current bid is the winner and pays the amount bid. A second price auction is also known as a Vickrey Auction after
William Vickrey who first described it and pointed out that bidders have a dominant strategy to bid their true values.
While the highest bidder pays the amount bid, an English auction is termed second-price since the winning bidder need only outbid the next highest bidder by the minimum increment. Thus the winner, effectively,
pays an amount equal to (slightly higher than) the second highest bid.
updated: 12 August 2005
HOW TO CITE THIS ENTRY
- To learn more:
- See news articles on auctions.
- Try a winner's curse applet on the applets page.
- Read about auction experiments at e-Economics.net.
- Learn about auctions by reading lecture notes.