For an advertising slot bidding problem, let's say there are two slots and two bidders. If bidder A bids \$10 and bidder B bids \$8, bidder A will win the first slot and pays \$8.

How about bidder B?

He will win the second slot, but how much does he pay since there is no more second bid following his bid?

Does he win the second slot without paying anything? Since it's a second price auction?

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    $\begingroup$ The literature really focuses on the case where #slots < # bidders. I'd have said that the second bidder should also pay the second bid (so, in your example, both pay $\$8$). Free would be far too attractive to the bidders. $\endgroup$ – lulu May 3 '16 at 16:32

As the problem is presented, the lowest bidder will win indeed the second slot with a bid of 8 and since it is a second-price mechanism, he will pay indeed the maximal value between 0 (as no other competitor is present) and the reserve price (if there is one) set by the seller, so in this case it will be 0.


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