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# 11.In this question weewalmine a second-peiled-bid auction for a single item. We'll consider a case in which true values for the item may differ...

This question was created from Auctions Tut 1.PDF https://www.coursehero.com/file/39710226/Auctions-Tut-1PDF/

11.In this question weewalmine a second-peiled-bid auction for a single item.
We'll consider a case in which true values for the item may differ across bidder
requires extensive research by a bidder to determine her own true value for a
maybe this is because the bidder needs to determine her ability to extract val
the item after purchasing it (and this ability may differ from bidder to bidder).
There are three bidBielders 1 and 2 have valodgeach of which is a ran-
dom number independently and uniformly distributed on theriitghval [0, 1].
having performed the requisite level of research, bidders 1 and 2 know their o
for the itemand y respectively, but they do not know each other's value for ite
Bidder 3 has not performed enough research to know his own true value for th
He does know that he and bidder 2 are extremely similar, and therefore that hi
valuesus exactly equal to the true walbilder The problem is that bidder
3 does not know this yahor does he know v
(a) How should bidder 1 bid in this auction? How should bidder 2 bid?
(b) How should bidder 3 behave in this Provide an explanation for your
answer; a formal proof is not necessary.

Case 1: b3 &gt; b2 &gt; bj. In this case bidder 3 wins, pays b2 and makes a profit of 0 since her/his value is v2.
Case 2: b3 &gt; b, &gt; b2. In this case bidder 3 wins, pays b, and makes a...

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