Auctions: First-Price vs. Second-Price

Topic: Introduction to Microeconomics — Two bidders with private valuations drawn uniformly from [0, 100]. Choose your valuation and bid to compare expected profits across auction formats.

Your valuation
50
Your bid
25
E[Profit] 1st-price
6.25
E[Profit] 2nd-price
6.25
Optimal bid (1st)
25
Optimal bid (2nd)
50

In a second-price auction, bidding your true value is a dominant strategy regardless of what the rival does. In a first-price auction with a uniformly distributed rival, the Nash equilibrium strategy is to bid half your value.