Dictionary :: Auctions

Glossary of game theory terms.

English Auction

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