midGame Theory
What is Vickrey auction (second-price sealed bid)?
Updated May 16, 2026
Short answer
A Vickrey auction is a sealed-bid auction where the highest bidder wins but pays the second-highest bid.
Deep explanation
This mechanism incentivizes truthful bidding because bidding your true value is a dominant strategy. It ensures efficiency and reduces strategic manipulation.
Real-world example
Used in spectrum auctions and ad auctions.
Common mistakes
- Thinking bidders should underbid to save money.
Follow-up questions
- Why is truth-telling optimal?
- What is first-price auction?