Vickrey Auction

How to Play

1. Each bidder has a private value for one item.
2. Enter sealed bids. A bidder does not observe the others' bids before the auction closes.
3. The highest bid wins the item.
4. The winner pays the second-highest bid, not the amount of the winning bid.
5. The winner's utility equals private value minus payment; losing bidders receive zero utility.

Try Strategic Misreports

Change a bidder's bid above and below the bidder's true value. Underbidding can cause a bidder to lose an item that would have produced positive utility. Overbidding can make the bidder win when the second-highest price exceeds the bidder's real value, producing negative utility.

Why Truthful Bidding Matters

In the standard independent-private-values model, bidding your true value is a dominant strategy in a second-price auction. Your own bid determines whether you win, while the price you pay is determined by somebody else's bid. This separates the allocation decision from the winner's payment in a particularly elegant way.

Mechanism-Design Connection

The Vickrey auction is a classic example of incentive compatibility. It shows how carefully designed payment rules can align an individual's strategic incentives with truthful information revelation. Use the simulator to compare revenue, winner utility and allocation efficiency under truthful and manipulated bids.