9 Auction Exercise Consider that two companies: companyA and companyB have 140CHF and 160CHF respectively, and are interested in buying a product P in a Vickrey auction. The auction allows bids in integer numbers i.e., it cannot be a float number. companyA values P at 140 CHF and companyB values P at 160 CHF. a If both companyA and companyB follow the best strategy, which allocation will be assigned by the auction mechanism? Product will be assigned to companyA Product will be assigned to companyB Suppose that companyA also has information that companyB values P at 160 CHF and wants to force the opposition into spending the maximum possible amount. What will companyA do? b Follow the best strategy Deviate from the best strategy
9 Auction Exercise Consider that two companies: companyA and companyB have 140CHF and 160CHF respectively, and are interested in buying a product P in a Vickrey auction. The auction allows bids in integer numbers i.e., it cannot be a float number. companyA values P at 140 CHF and companyB values P at 160 CHF. a If both companyA and companyB follow the best strategy, which allocation will be assigned by the auction mechanism? Product will be assigned to companyA Product will be assigned to companyB Suppose that companyA also has information that companyB values P at 160 CHF and wants to force the opposition into spending the maximum possible amount. What will companyA do? b Follow the best strategy Deviate from the best strategy
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:What will be companyA's bid?
Answer
Transcribed Image Text:9 Auction Exercise
Consider that two companies: companyA and companyB have 140CHF and 160CHF respectively, and are
interested in buying a product P in a Vickrey auction. The auction allows bids in integer numbers i.e., it cannot
be a float number. companyA values P at 140 CHF and companyB values P at 160 CHF.
If both companyA and companyB follow the best strategy, which allocation will be assigned by the auction
a
mechanism?
Product will be assigned to companyA
Product will be assigned to companyB
Suppose that companyA also has information that companyB values P at 160 CHF and wants to force the
opposition into spending the maximum possible amount.
b
What will companyA do?
Follow the best strategy
Deviate from the best strategy
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