[jackcarter]

The optimal strategy in a second-price auction is to bid the true amount you're willing to pay (or be paid, in this case).

You can show that bidding higher or lower than this amount is dominated by bidding the true amount. If you bid higher than your true amount, this can only hurt you: You won't get any more money to stop using Facebook, because if you win, you get the second-lowest bidder's bid amount. It only makes a difference if you increase your bid too far, and lose the auction.

If you bid lower than your true amount, you might win when you otherwise would not have won... but you underbid! You're not getting enough money to compensate you for the loss of Facebook.

See: https://en.wikipedia.org/wiki/Vickrey_auction

Now, I could imagine that there might be a systemic bias towards overbidding, because people aren't good at valuing their cost of foregoing Facebook.

[ineedasername]

But given the lack of information, a person might reasonably try to make educated guessed about other people's bids. And often enough there's not one price a person has, it's more of a range. The combination complicates the thought process: A person might think anything over $100 would put them out of the running, but is willing to accept as little as $60. Their goal is to maximize their price within that range. Then it's not as simple as choosing your "true" price, the thought process is about choosing the highest price within your range that you believe is less than someone else's. I guess you might say any price within the range is a "true" price, but it does complicate the optimal strategy to include a bit more thought than just a single value.

[jackcarter]

If I'm willing to accept as little as $60, then I should bid $60. If someone else bids $1000, then I get $1000. I don't do any better by anticipating their bid and inflating my own bid to $999. If they bid $61, I get $61, and because I value not-having-Facebook at $60, that means I get $1 of surplus value.

Anyone bidding higher than their minimum price doesn't fully understand the second-price auction. Probably lots of people don't understand it, which could lead to inflated bids. (but that doesn't mean you, knowing better, should inflate your own bid!)

[ineedasername]

ah, never mind then, I get it. I was thinking about backwards, or maybe sideways, but either way not right side up. Thanks for the explanation.

[Retric]

That's only true if the item is unique.

If their are multiple identical items and multiple bidders then bidding the true amount can become sub optimal.