4. An auctioneer holds a second-price auction for two bidders, Ann (A) and Bonnie (B), who have independent private values of the good 0 and 0. If a bidder wins, her payoff is her value 0 minus the price she pays, and if she loses, her payoff is 0. The values are independently and identically distributed, but otherwise you don't need to know the specific distributions to solve the problem. Ann and Bonnie's respective strategies are to bid some value be). that is, bid given their privately-known value (type). a. Explain what a second price auction is, who wins given some pair of bids b, and bg and what the winner pays. b. Why is a strategy where Ann bids above her own value e, weakly dominated by a strategy where she bids her value? c. Why is a strategy where Ann bids below her own value e, weakly dominated by a strategy where she bids her value?

4. An auctioneer holds a second-price auction for two bidders, Ann (A) and Bonnie (B), who have independent private values of the good 0 and 0. If a bidder wins, her payoff is her value 0 minus the price she pays, and if she loses, her payoff is 0. The values are independently and identically distributed, but otherwise you don't need to know the specific distributions to solve the problem. Ann and Bonnie's respective strategies are to bid some value be). that is, bid given their privately-known value (type). a. Explain what a second price auction is, who wins given some pair of bids b, and bg and what the winner pays. b. Why is a strategy where Ann bids above her own value e, weakly dominated by a strategy where she bids her value? c. Why is a strategy where Ann bids below her own value e, weakly dominated by a strategy where she bids her value?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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