Econ 483_Lecture 6_Prizes_Contests

P rizes contests ebay descending dutch auctions john

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Unformatted text preview: test & pays $50. If only one player is active, he wins at the current price. Lecture 6: Prizes & contests, Econ483: Econ of Innovation & Technology, Evangelia Chalioti c A ll rights reserved. P rizes Contests Ebay Descending (Dutch) auctions John reports $50. George reports $40. Mary reports $45. The start price is $60 (the increment is $10). All players are initially inactive. $60: John, George & Mary are inactive. $50: John is active. ! John wins the contest & pays $50. The …rst player to respond wins at the current price. Lecture 6: Prizes & contests, Econ483: Econ of Innovation & Technology, Evangelia Chalioti c A ll rights reserved. P rizes Contests Ebay In both cases, the person willing to bid the most wins. the winner gets the current (winning) price. But, truth-telling cannot be induced. Lecture 6: Prizes & contests, Econ483: Econ of Innovation & Technology, Evangelia Chalioti c A ll rights reserved. P rizes Contests Ebay Firms report faithfully on Vickrey auctions. ! Such auctions are similar to ascending auctions but, the winner gets the second-highest bid. Lecture 6: Prizes & contests, Econ483: Econ of Innovation & Technology, Evangelia Chalioti c A ll rights reserved. P rizes Contests Ebay Vickrey (second-price) auctions John reports $50. George reports $40. Mary reports $45. The start price is $30 (the increment is $10). All inventors are initially active. $30: John, George & Mary are active. $40: John, George & Mary are active. $50: Only John is active. ! John wins the contest & pays $40. Lecture 6: Prizes & contests, Econ483: Econ of Innovation & Technology, Evangelia Chalioti c A ll rights reserved. P rizes Contests Ebay Contests A (second-price) Vickrey auction The sponsor asks each prospective innovator i to report the social surplus ci that it could provide. si = 1 vi r The sponsor chooses the …rm that reports the highest net surplus. The sponsor promises a payment to the winner i equal to 1 vi r sj Notice that t...
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