Economics

The auction where bidding your true value is the smartest move

In a Vickrey auction, the highest bidder wins but pays only the second-highest bid, not their own. This quirky rule makes honest bidding a dominant strategy: bidding above or below your true valuation can only hurt you, never help. William Vickrey proved this in 1961, and the design now underpins eBay-style mechanisms and the ad auctions run by Google.

William Vickrey, Counterspeculation, Auctions, and Competitive Sealed Tenders — The Journal of Finance, vol. 16, 1961

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