Unformatted text preview: Q ) (200 ) 250 (0.80 0.004 ) Q Q Q Q π =- =-At the optimal bid marginal profit equals zero. Thus, at the optimum, the bid must satisfy 0.80 0.008 0.008 0.80 100 Q Q Q-= = = The optimal bid is therefore 100, which is equal to one-half of your true valuation, 200. Thus, a strategy of bidding one-half of your valuation is a Nash equilibrium; it is the best you can do given the other player’s strategy....
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- Spring '08
- Game Theory, Auction, Auctioneering, optimal bid, bid marginal profit