The optimal strategy for a risk-neutral bidder in a second-price, sealed-bid auction with independent private values is to bid:

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Quizplus · Accepted Answer

In a second-price, sealed-bid auction with independent private values, each bidder's valuation of the item being auctioned is private information. The optimal strategy for a risk-neutral bidder is to bid his or her true valuation, as this will maximize the bidder's expected utility. Bidding less than his or her true valuation will increase the likelihood of losing the auction and may result in a lower expected utility, while bidding more than his or her true valuation may result in winning the auction but paying too high a price, again leading to a lower expected utility. Therefore, the bidder should bid his or her true valuation to maximize the expected utility.

The Optimal Strategy for a Risk-Neutral Bidder in a Second-Price