Private-value auction
An auction where the prize is worth a different, personal amount to each bidder.
What it means
An auction in which each bidder has their own valuation of the item, known to themselves and independent of what others think it is worth, as with a collectible bought purely for personal enjoyment. Because no bidder's value depends on others' information, learning a rival's bid carries no lesson about your own valuation, so the winner's curse does not arise. The independent-private-values model yields the revenue equivalence theorem, under which standard auction formats generate the same expected revenue. It matters as the clean theoretical benchmark against which common-value complications and real-world departures are measured.
Examples
Two collectors bid for a painting each loves to a different degree; one's willingness to pay says nothing about the other's.
At a school fundraiser, a signed shirt goes to the parent whose child idolises that player; what the underbidder would have paid says nothing about its worth to that family.
Bidding for a ticket to see the band you grew up with, you learn nothing when a rival drops out early — you already know exactly what the night is worth to you.
First described in William Vickrey (1961).