In a sealed-bid, second-price auction with perfect information, the winner of the auction is:
A) The bidder who values the object least and pays what the object is worth to the next highest bidder.
B) The bidder who values the object most and pays the bid submitted.
C) The bidder who values the object most and pays what the object is worth to the next highest bidder plus the bidding increment.
D) The bidder who values the object least and pays what the object is worth to the highest bidder.
E) None of the above.

Question

Quizplus · Accepted Answer

In a sealed-bid, second-price auction with perfect information, the winner is indeed the bidder who values the object the most. However, contrary to choice C, they pay the amount of the second-highest bid, not the second-highest bid plus a bidding increment. My previous response contained an error in interpreting the auction rules.

In a Sealed-Bid, Second-Price Auction with Perfect Information, the Winner