What type of auction does Land Shark Inc. participate in?

• A. Dutch auction
• B. Ascending-bid English auction
• C. Vickrey auction
• D. First-price sealed-bid auction

Answer: (D)

Bidding in sealed-bid auctions depends on whether bids are private and what price the winner pays. In a first-price sealed-bid auction, each bidder submits one bid privately, the highest bid wins, and that winner pays exactly the amount they bid. This setup creates a strategic choice: bidders tend to shade their bids downward to avoid overpaying while still aiming to beat competitors, since their payment equals their own bid if they win.

This differs from a Vickrey (second-price sealed-bid) auction, where the highest bidder wins but pays the second-highest bid, which changes the incentive to bid truthfully. It also differs from a Dutch auction, where the price is publicly lowered until someone accepts, and from an ascending English auction, where bids are public and the winner pays the final bid they submitted.

If Land Shark Inc. participates in a scenario where bids are submitted privately and the winner pays their own bid, that matches a first-price sealed-bid auction.