førsteprisbudauktion

A first-price sealed-bid auction is a type of auction where all bidders submit sealed bids simultaneously, and the highest bidder wins the item. However, the winning bidder pays the price they bid, not the price of the second-highest bid. This is in contrast to a second-price sealed-bid auction, also known as a Vickrey auction, where the winner pays the second-highest bid.

In a first-price sealed-bid auction, bidders have an incentive to strategize carefully. Bidding too high risks overpaying, while bidding too low risks losing the item to a competitor. The optimal bid in such an auction is typically less than the bidder's true valuation of the item, as they aim to maximize their profit. This means the winner does not necessarily pay what they truly believe the item is worth.

This auction format is common in various scenarios, including government procurement, the sale of certain financial instruments, and in online advertising markets where advertisers bid for ad space. The simplicity of its rules makes it straightforward to implement, but the strategic complexity for bidders can lead to outcomes that are not necessarily Pareto efficient. Understanding bidder behavior and market dynamics is crucial for participants in first-price sealed-bid auctions.