The optimal bidding strategy in a second-price auction is similar to that of a(n)________ auction,because dominant strategies are at work in both of them.

Question

Quizplus · Accepted Answer

In both a second-price auction and an English auction, the dominant strategy for each bidder is to bid their true valuation of the item. In a second-price auction, the highest bidder wins but pays the second-highest bid, encouraging bidders to bid their true value to maximize their chance of winning without the risk of overpaying. Similarly, in an English auction, where the price ascends and bidders drop out when the price exceeds their valuation, the winning bidder pays just above the second-highest valuation, effectively making it optimal for bidders to stay in the auction until the price reaches their true valuation.

The Optimal Bidding Strategy in a Second-Price Auction Is Similar