First Price Sealed-Bid Auction
In a first-price sealed-bid auction, each bidder submits a sealed bid to the seller (that is hidden from other bidders). The high bidder wins and pays his bid for the good. Generally, a sealed-bid format has two distinct parts--a bidding period in which participants submit their bids, and a resolution phase in which the bids are opened and the winner determined.
When multiple units are being auctioned, the first-price sealed-bid auction is refered to as a "discriminatory" auction because not all winning bidders pay the same amount. It works as follows. In a discriminatory auction (more than one unit for sale), sealed bids are sorted from high to low, and items awarded at highest bid price until the supply is exhausted. The most important point to remember is that winning bidders can (and usually do) pay different prices.
In a first-price sealed-bid auction, it is advantageous for a bidder to gather information about the competing bids before deciding on his own bid. Therefore, the "privacy" issue is essential in this auction format.
The first-price sealed-bid auction is also used to award construction contracts. However, there is a difference. In a sealed-bid auction awarding a construction contract, the bidders are sellers rather than buyers. Therefore, the winning bid is the lowest bid. Please see procurement auction.
The Swiss auction is a variation of the first-price sealed-bid auction. What is unusual about the Swiss auction is that though the bid itself may not be modified, the winner can choose whether to accept or refuse the item. The name "Swiss auction" comes from the use of this auction by the Swiss construction industry to award contracts. Architects argue in favor of this auction technique because timetables and specifications nearly always require modification and there is no point in working with a contractor who doesn't want a certain job.