Auction Theory

Auction Theory, a branch of Game Theory, studies how people bid in auctions and how auction design affects outcomes.

Types of Auctions

Common types include English (ascending), Dutch (descending), First-Price Sealed-Bid, and Second-Price (Vickrey) auctions.

Bidding Strategies

In a First-Price auction, bidders shade their bids below value: \(b_i = v_i - \epsilon\). In Vickrey, bidding true value \(b_i = v_i\) is optimal.

Applications

Used in spectrum auctions, online ad bidding (e.g., Google Ads), and art sales.