Why can’t someone bid more than they can offer in a second price auctions?


Why can’t an individual place a bid of 10,000$ on a pen, knowing they will only pay the last biggest bid of 10$, and no one can top their offer, because no one will pay that price?

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For precisely that reason. If such a move were allowed, it would become a race for “Who can make the most outlandish bid the fastest”.

Many auctions would have to be declared Null from two people bidding astronomical sums, and neither wanting to actually pay the second bid.

This is also the reason that most “Second Price” auctions are blind/silent. You won’t bet insane sums if you don’t know what the second bid is. For all you know, someone already bid $700 when you would’ve gone $1000 but only wanted to pay $50. You’ll only bet what you’re comfortable paying, and only pay a reasonable “Second Price”

You *could*, but imagine what happens if two (or more people) have the same “bright” idea…you bid $10,000 “knowing” that you’ll only pay $10. Except your buddy has the same bright idea and bids $100,000 just to screw you, and now you’re paying $10,000 for a $10 pen.

You might say, “Well, screw *him*, I’m bidding $200,000!” and now you’re in a death spiral. And the auctioneer is rubbing his/her hands in glee.

The only sensible thing to do to prevent this is to bid as much as you’re willing to pay, but not more, which is the entire point of an auction.


In typical implementations of second-price auctions the bids are sealed. So you don’t know what the second price is. So you don’t “know” you’re only paying $10. For all you know it could be $9,999.

Let’s say you bid £10 000 on a pen that is worth £10 to you. Another person comes along and bids £15 because that is what it is worth to them. Now you are stuck paying £15, £5 more than the pen is worth to you.