Suppose you were competing in a sealed-bid,second-price auction for a Vermeer painting,which you happen to value at $100,000.What bid should you submit?
A)Exactly $100,000
B)Somewhat lower than $100,000 depending on the number of other bidders
C)Somewhat higher than $100,000 depending on the number of other bidders
D)Cannot say which of a,b,or c is right without further information

Question

Quizplus · Accepted Answer

In a sealed-bid, second-price auction, the best strategy is to bid exactly what the item is worth to you. If you win, you pay the second-highest bid, not your own, so bidding your true valuation ensures you do not overpay.

Suppose You Were Competing in a Sealed-Bid,second-Price Auction for a Vermeer