What is the significance of a tie in a first-price sealed-bid auction?

• A. The higher bid among the tied bids wins.
• B. A coin flip decides the winner.
• C. The tie results in a rerun of the auction.
• D. The tie causes both bidders to be disqualified.

Answer: (B)

In a first-price sealed-bid auction, the winner is the highest bidder, but when multiple bidders submit exactly the same top bid there needs to be a fair way to pick a single winner. A coin flip is the standard tiebreaker because it gives each tied bidder an equal chance of winning, preserving symmetry among bidders and keeping the mechanism well-defined and simple. This randomness also fits neatly into modeling and reasoning about bidding strategies, since ties introduce an element of chance that bidders must account for in equilibrium behavior. Other options—like selecting the higher bid among tied bids (impossible when bids are equal), rerunning the auction (adds cost and delay), or disqualifying both (unfair and inefficient)—do not provide a fair, practical resolution.