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hw7 - What is the symmetric and increasing bidding...

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ECON 401: Assignment 7 due date: November 23, 2011 1. An object is for sale via an auction. Suppose there are two bidders. Bidders°private values are i.i.d. distributed on [0 ; 1] with the cdf function F ( ° ) . We consider the the following auction formats. An auction with a reserve price r 2 (0 ; 1) , i.e., only bids larger than or equal to r are accepted. (a) The 2nd-price sealed-bid auction. Note that if only 1 bid is submitted, and it is greater than r , then the second price is r . If no bid is submitted, the auction ends and no one gets the object. What is the symmetric and increasing bidding equilibrium? What is the seller°s expected revenue? (b) The 1st-price sealed-bid auction. Note that if no bid is submitted, the auction ends and no one gets the object.
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Unformatted text preview: What is the symmetric and increasing bidding equilibrium? What is the seller&s expected revenue? 2. An object is for sale via the standard 2nd-price sealed-bid auction. To encourage participation, the auctioneer o/ers subsidy to every bidder that submits a bid ± He will get a subsidy of the average of his opponents&bids. That is, every bidder submits his bid in a sealed envelop. The one who bids the highest price wins ± he gets the object and pays the second highest price. Furthermore, every bidder, regardless of winning, gets a subsidy of the average of his opponents&bids. What will be the outcome of the auction? Justify your answer. 1...
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