Sealed bid auctions Sealed bid auctions have similar outcomes to oral auctions, but with a slightly different mechanism. In determining how high to bid, bidders try to maximize expected profits, the probability of winning times the profits if they do win. Many auction forms are mixtures of sealed and open auctions. For example, sellers will often turn what looks like a sealed bid auction into an oral auction by soliciting counteroffers from other bidders. An alternate strategy is to solicit more buyers and make them compete against one another in an auction.
Nobody knows the value of the item, but it is the same for everyone.
Bidders have an estimate of the value, but it is only an estimate. Unlike private value auctions, bidders should not be willing to bid up to their estimate of the value. If they win, it will only mean that their estimate was higher than everyone else's, and is probably above the true value of the item. This is known as the winner's curse . To avoid the curse, bid lower than your estimate of the value.