Mathematically, all fair auctions provide the same optimal price to the seller. It's called the Revenue Equivalence Theorem. Google's auction is not fair in th

Mathematically, all fair auctions provide the same optimal price to the seller. It's called the Revenue Equivalence Theorem. Google's auction is not fair in the sense that Google is both the seller and the auctioneer. Squashing enters the situation when the second price bidder has an ad that is more likely to be clicked than the first price bidder and therefore has additional revenue potential (known only to Google) beyond the revenue offered by the bid. Google then assigns this additional expected revenue to the value of the second price bid and declares this to be the market value of the bid. I see where their argument comes from, but it's a pretty lousy one.