An auction in which the bidder who submitted the highest bid is awarded the object being sold and pays a price equal to the amount bid.
Alternately, in a procurement auction, the winner is the bidder who submits the lowest bid, and is paid an amount equal to his or her bid.
In practice, first-price auctions are either sealed-bid, in which bidders submit bids simultaneously, or Dutch.
Alternately, second price auctions also award the object to the highest bidder, but the payment is equal to the second-highest bid.
Unlike second price auctions, in which bidding one's true value is a dominant strategy, in first-price auctions,
bidders shade ther bids below their true value.
updated: 12 August 2005
HOW TO CITE THIS ENTRY
- To learn more:
- See news articles on auctions.
- Try a winner's curse applet on the applets page.
- Read about auction experiments at e-Economics.net.
- Learn about auctions by reading lecture notes.