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First-Price Auction Model

In the first-price auction model, bidders pay the exact amount of their winning bid. This model is also referred to as an English auction.

For example:

  • Bidder A bids $4.00.
  • Bidder B bids $4.50.
  • Bidder C bids $4.20.

In this case, Bidder B wins by bidding the highest amount and pays $4.50—the full price of their bid, as required by the first-price auction model.