<b>Why "just bid your true value" stopped being correct</b>

<b>Why "just bid your true value" stopped being correct</b>

Classic auction theory says a second-price (Vickrey) auction is truthful (your best strategy is to bid exactly what the impression is worth to you). Programmatic broke that guarantee, and buyers who still believe it overpay.

Why truthful bidding held in theory:
— In a sealed second-price auction, you pay the runner-up's bid, not your own. Raising your bid can only win more without changing what you pay; lowering it can only lose auctions you'd have profited from. So bidding your true value is optimal.

Why programmatic violated every assumption:
— The open exchange is first-price now: you pay your own bid, so over-bidding directly costs you. Truthful bidding is no longer optimal — shading is.
— Even where second-price survives, dynamic floors mean your bid influences the floor you'll face later, breaking the "bid can't affect price" assumption.
— Multiple parallel auctions for the same impression (header bidding plus the ad server) mean you're not in one sealed auction but a chain, where strategy in one stage affects another.
— Reserve prices and soft floors add price-setting levers the textbook auction doesn't have.

The practical stance: there is no single dominant strategy across programmatic. The correct bid depends on the path's pricing rule, its floor dynamics, and how censored your data is.

Why it matters: the elegant truthful-bidding result assumed a clean, single, static second-price auction. Real supply is first-price, multi-stage, and adaptive — so the only safe assumption is that no setting transfers unchanged from the textbook to the bidstream.

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