Vickrey Auctions in Practice: From Nineteenth-Century Philately to Twenty-First-Century E-Commerce

Abstract

William Vickrey (1961) proposed an auction mechanism in which bidders submit sealed bids, and the highest bidder wins the good in return for payment of the second-highest bid amount. For decades, economists have credited Vickrey with inventing this auction format, and have believed that the Vickrey auction is rarely used in practice. This paper presents evidence that Vickrey auctions have long been the predominant auction format for mail sales of collectible postage stamps. Stamp auctioneers developed this auction format on their own, as early as 1893, even before Vickrey was born.