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slide30-nov14 - ECON 401: Auctions Siyang Xiong Rice...

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ECON 401: Auctions Siyang Xiong Rice University November 13, 2011 Xiong (Rice University) ECON 401 November 13, 2011 1 / 17
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English Auction one object is for sale; the price starts from a low price; the auctioneer counts up the price; all bidders signal to quit the auction; when the second to the last bidder quits, the auction ends, and the price stops there; the last remaining bidder wins the auction, i.e., gets the object; the winner pays the stopping price; Use a fair coin toss to break the tie. Xiong (Rice University) ECON 401 November 13, 2011 2 / 17
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2nd-price sealed-bid auction one object is for sale; bidders submit bids (his price to buy the price) in sealed envelops; The one bidding the highest price wins the auction; The winner pays the second highest bidding price; Use a fair coin toss to break the tie. Xiong (Rice University) ECON 401 November 13, 2011 3 / 17
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2nd-price sealed-bid auction Vs English auction The 2nd-price sealed-bid auction is strategically equivalent to English auction What is the strategy for every bidder in the English auction? what is the price to quit; What is the strategy for every bidder in the 2nd-price sealed-bid auction? what is maximal price to buy, i.e., for any price higher than my bidding price, I will not buy it. In both auctions, the highest bids wins, and he pays the second highest bidding price. Xiong (Rice University) ECON 401 November 13, 2011 4 / 17
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how should we bid in the the 2nd-price sealed-bid auction? bidding the true value is the weakly dominant strategy! Xiong (Rice University) ECON 401 November 13, 2011 5 / 17
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2nd-price sealed-bid auction: other equilibrium involving weakly dominated strategies there existing a weakly dominant strategy for both bidders: bidding the true value;
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slide30-nov14 - ECON 401: Auctions Siyang Xiong Rice...

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