242q4s02 - b. Bid above their true valuations. c. Shade...

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ECONOMICS 242 QUIZ 4 SPRING 2002 PLEDGE:____________________________ NAME:______________________________ 1. Lands End has a feature at their online store called “On the Counter.” In this part of the store, items are sold at a discount that increases over the course of the week. For instance, on Monday, the discount is 25% and the discount rises to 75% by Friday. The people who bid first receive the item. Typically, by Friday, very few items are left. What type of auction does this resemble and why? 2. Explain why bidding your true valuation is a dominant strategy in a second price sealed bid auction.
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3. In a common value first price sealed bid auction with two bidders, the bidders’ best strategy is to: a. Always bid their true valuations.
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Unformatted text preview: b. Bid above their true valuations. c. Shade their bids below their true valuations. d. Bid the valuation of the second highest bidder. 4. Suppose you are auctioning off an item and you fear collusion between the bidders at the auction. If this was the case, you would be better off using a: a. First price sealed bid or Dutch auction. b. Second price sealed bid or English auction. c. First price sealed bid or English auction. d. Second price sealed bid or Dutch auction. 5. We showed in class that under certain circumstances, if a first- price sealed bid auction design is used, bidders have a Nash equilibrium strategy of bidding exactly half of their true valuation. What is a Nash equilibrium?...
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242q4s02 - b. Bid above their true valuations. c. Shade...

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