First Price Sealed-Bid Auctions

In a first price sealed-bid auction, the buyers simultaneously submit bids for the good being sold. The person who bids the most wins and gets the good at the amount he bid. All bids are made simultaneously and secretly. For example, assume that the following amounts are bid:

Table 11

Bidder	Amount Bid
Tom	$100
Jane	$90
Sue	$30

Tom wins the auction and pays $100.

In a first price sealed-bid auction, you should always bid less than what the good is worth to you. If you bid more and win, you are worse off. If you bid what the good is worth to you and win, you really get nothing, because what you paid was exactly equal to what you got. In first price sealed-bid auctions, you need to decide how much to risk. The lower you bid, the greater the benefit of winning, but the lower the chance that you will actually win. Ideally, you should attempt to estimate what other people will bid when formulating your own bidding strategy.