First-price auction
Advertising mechanicsDefined term⦿ live instrument below
In a first-price auction the winning bidder pays its own bid. There is no discount to the runner-up's price, so rational bidders shade bids below their true values, and exchanges responded with bid-shading services that estimate the minimum winning price.
Programmatic display consolidated on first-price rules around 2019, trading GSP's gentler incentives for transparency across a chain of intermediary exchanges. Comparing both rules on identical bids in the simulator shows how much of 'auction strategy' is really mechanism, not psychology.
PosAdvertiserAd rank = bid × qualityPays
1B$2.50 × 8$2.41−4%
2C$3.20 × 6$2.68−16%
3A$4.00 × 4$2.26−44%
4D$1.80 × 5$0.51−72%
Advertiser B holds position 1 without the highest bid — quality is doing the work.