In a normal auction you take the highest offer, but stiff competition will cause the final offer to be too high. If we're talking about megarich people buying

In a normal auction you take the highest offer, but stiff competition will cause the final offer to be too high. If we're talking about megarich people buying Rembrandts, who cares. But generally this is a bad thing: we're failing to discover the real value of the thing being auctioned, and we're being wasteful. For bidding on jobs (e.g., highway construction) one normally takes the lowest bid, but the lowest bidder will not make any profit and might lose money on the deal, thus putting the project at risk. What might happen in those cases is that corruption takes root and the lowest bidder gets paid more money illegally. In any case, sealed bid, second price bidding solves the problem by removing the incentive to offer the best price and instead offer the real value.