I tried to look for this term on the Internet, to no avail, as what I found does not fit into the context I found this word in.

My context is: The incentive-compatible instrument of Vickrey Auction is that there is no incentive for bidders to submit speculative bids.

What does "speculative bid" mean here?

Thanks in advance.

  • $\begingroup$ This context does not appear anywhere on the internet. Can you please name its source or provide a link to it? $\endgroup$ – Giskard Nov 4 '17 at 16:14
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    $\begingroup$ Actually it is from a script of my professor. $\endgroup$ – Aqqqq Nov 4 '17 at 17:59

A speculative bid in a Vickrey auction means that it is not what the bidder really thinks that the product is worth. Hence, a speculative bid is anything different from the true valuation of this product by the bidder (either a smaller or a larger price than the true one).

In a Vickrey auction, the bidder has incentive to reveal his/her true valuation. If he/she does not do so, he/she risks losing (either by winning the bid and paying more than what the product is worth for them - if price was higher than true valuation -, or by losing the bid - if price was lower than true valuation).

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  • $\begingroup$ please consider marking this as an accepted answer =) $\endgroup$ – python_enthusiast Nov 5 '17 at 3:33

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