What is a Second-Price Auction and Why We Like It

The U.S. has witnessed a crazy housing market has in the past year with demand far outstriping supply. Buyers are involved in bidding wars by adding an escalation clause to the offer, saying that if there are competing offers, the buyer would like to bid $10k, for example, higher than the competing offer until some maximum value. If the competing offer also has an escalation clause, which is often the case in the past year, the seller will communicate with all potential buyers until no one bids higher.

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