Japanese Car Auctions

Japanese auction[1] (also called ascending clock auction[2]) is a dynamic auction format. It proceeds in the following way.

  • An initial price is displayed. This is usually a low price – it may be either 0 or the seller’s reserve price.
  • All buyers that are interested in buying the item at the displayed price enter the auction arena.
  • The displayed price increases continuously, or by small discrete steps (e.g. one cent per second).
  • Each buyer may exit the arena at any moment.
  • No exiting buyer is allowed to re-enter the arena.
  • When a single buyer remains in the arena, the auction stops. The remaining buyer wins the item and pays the displayed price.


Suppose a buyer believes that the value of the item is v. Then this buyer has a simple dominant strategy: stay in the arena as long as the displayed price is below v; exit the arena whenever the displayed price equals v. This means that the Japanese auction is a truthful mechanism: it is always best to act according to your true value, regardless of the others’ values.

When all buyers play their dominant strategies, the outcome is:

  • The winning buyer is the buyer with the highest valuation;
  • The final price is the second-highest valuation.

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