First-price sealed-bid auction

As a (hidden ) Erstpreisauktion (first- price sealed bid auction) is referred to in the auction theory, a form of auctions where the highest bidder is awarded the contract and must be paid at the end of the light emitted from him winning bid. The bids will be submitted once so that they are not known to the other bidders ( " hidden ", as in the case of disposal in an envelope that will be opened only after the end of the bidding process ).

Erstpreisauktionen are distinguished from the so-called second- price auctions, although they use the same format and an identical allocation mechanism ( the highest bidder wins), in which the winner but must only pay the second highest bid submitted. In another dimension, they set themselves apart by English auctions where even the highest bidder wins, but another auction format is selected.

From a theoretical point of view the auction Dutch auction strategically equivalent to a Erstpreisauktion, because in both types of auctions use the bidder the same strategies.

Payoff function

Be the appreciation of individual i, and is the commandment given by i. Further, let the payoff function of bidder i in a Erstpreisauktion this is then

The case is regularly dissolved by randomization or, for theoretical simplification by the commandments initially numbered and can win the one with the highest / lowest number in a tie.