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Say there are two people who evaluate an object at 5 dollars and a third who evaluates it at 4 dollars playing a second price sealed bid auction. The first two bid 5 dollars and the third bids 4 dollars. How is the tie broken and how much do they pay?

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The winner pays the second highest bid, which is 5 dollars, however who the winner is depends on the tie-breaking rule. There are multiple rules one could use. In most cases it is assumed that the winner is selected randomly from among the people who placed the highest bids. But you could also select the winner from this group alphabetically or by checking who submitted their bid first.

In case of a Vickrey auction in equilibrium when multiple players place the same highest bid all such players are indifferent between winning and losing, so the exact tie-breaking rule is usually not very important, it does not affect the players' equilibrium payoff nor the seller's revenue.

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