second-price auction

A second-price auction is a type of bidding process where the highest bidder wins the item, but they pay the amount offered by the second-highest bidder instead of their own bid. This encourages bidders to bid their true maximum value, knowing they won't necessarily pay that amount if they win. For example, if you bid $100 and the next highest bid is $80, you'll win but pay only $80. This system promotes honest bidding, as bidders don’t need to strategize about how much below their true value they should bid.