A second-price sealed-bid auction is an auction in which everyone submits a sealed bid and the winner is the __________ bidder, but the winner pays a price equal to the second-highest bidder's price.

Question

Quizplus · Accepted Answer

In a second-price sealed-bid auction, the highest bidder wins, but they only pay the price of the second-highest bid. This type of auction encourages bidders to bid their true valuation of the item, as they know they will not have to pay more than the second-highest bid even if they bid higher.

A Second-Price Sealed-Bid Auction Is an Auction in Which Everyone