A Vickrey auction or sealed-bid second-price auction (SBSPA) is a type of sealed-bid auction. Bidders submit written bids without knowing the bid of the other people in the auction. The highest bidder wins but the price paid is the second-highest bid. This type of auction is strategically similar to an English auction and gives bidders an incentive to bid their true value. The auction was first described academically by Columbia University professor William Vickrey in 1961 though it had been used by stamp collectors since 1893. In 1797 Johann Wolfgang von Goethe sold a manuscript using a sealed-bid, second-price auction. Vickrey's original paper mainly considered auctions where only a single, indivisible good is being sold. The terms Vickrey auction and second-price sealed-bid auction are, in this case only, equivalent and used interchangeably. In the case of multiple identical goods, the bidders submit inverse demand curves and pay the opportunity cost. Vickrey auctions are much studied in economic literature but uncommon in practice. Generalized variants of the Vickrey auction for multiunit auctions exist, such as the generalized second-price auction used in Google's and Yahoo!'s online advertisement programmes (not incentive compatible) and the Vickrey–Clarke–Groves auction (incentive compatible). Properties Self-revelation and incentive compatibility In a Vickrey auction with private values each bidder maximizes their expected utility by bidding (revealing) their valuation of the item for sale. These type of auctions are sometimes used for specified pool trading in the agency mortgage-backed securities (MBS) market. Ex-post efficiency A Vickrey auction is decision efficient (the winner is the bidder with the highest valuation) under the most general circumstances; it thus provides a baseline model against which the efficiency properties of other types of auctions can be posited. It is only ex-post efficient (sum of transfers equal to zero) if the seller is included as "player zero," whose transfer equals the negative of the sum of the other players' transfers (i.e. the bids). Weaknesses It does not allow for price discovery, that is, discovery of the market price if the buyers are unsure of their own valuations, without sequential auctions. Sellers may use shill bids to increase profit. The Vickrey–Clarke–Groves (VCG) mechanism has the additional shortcomings: It is vulnerable to bidder collusion. If all bidders in Vickrey auction reveal their valuations to each other, they can lower some or all of their valuations, while preserving who wins the auction. It is vulnerable to a version of