Dictionary :: Auctions

Glossary of game theory terms.

First Price Auction

An auction in which the bidder who submitted the highest bid is awarded the object being sold and pays a price equal to the amount bid. Alternately, in a procurement auction, the winner is the bidder who submits the lowest bid, and is paid an amount equal to his or her bid. In practice, first-price auctions are either sealed-bid, in which bidders submit bids simultaneously, or Dutch. Alternately, second price auctions also award the object to the highest bidder, but the payment is equal to the second-highest bid. Unlike second price auctions, in which bidding one's true value is a dominant strategy, in first-price auctions, bidders shade ther bids below their true value.

updated: 12 August 2005