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Class_14 - Econ 171 – Introduction to Game Theory Lecture...

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Unformatted text preview: Econ 171 – Introduction to Game Theory Lecture 14 Outline Today: Other Bayesian games: Intro to auctions Second price auctions First price auctions Tomorrow: Information aggregation, mechanism design, social choice Bayes' rule Intro to Perfect Bayesian Equilibrium Tuesday: Perfect Bayesian Equilibrium The Principal-Agent problem The Principal-Agent problem was a type of a Bayesian game, with payoff uncertainty due to Nature's action and incomplete information stemming from the inability of the Principal to observe the Agent's effort (asymmetric information). The P-A problem stems from conflicting incentives, creating a moral hazard dilemma for the Agent. We saw that a contract (a wage & bonus) can resolved the problem by incentivizing the desired behavior. Incentive compatibility and participation constraints. A simple auction A Dollar auction First-price auction How much would you bid on a dollar? Highest bid wins, pays their bid. Another simple auction Jar of coins auction “Common-value” auction A jar of coins is being auctioned, the highest bidder wins the auction. Today we will investigate some different types of auctions and their optimal bidding strategies Introduction to auctions Why auctions? A seller wants to sell her good at the highest price she can obtain. When there are multiple prospective buyers, she would like to find the buyer with the highest valuation and sell at a price that is or is closest to this valuation....
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This note was uploaded on 11/03/2011 for the course ASAM 2 taught by Professor Staff during the Spring '10 term at UCSB.

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Class_14 - Econ 171 – Introduction to Game Theory Lecture...

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