Consider a first-price auction to sell an object in which there are 3 bidders. Recall that in a first-price auction, the bidder who makes the highest bid wins. And the price he pays for the object is equal to his bid. Here, we also assume that if there is a tie, the bidder with the biggest index wins. For instance, if (b1.b2.b3)-(5,6,6), bidders 2 and 3 make the highest bids. The bidder who wins the object is bidder 3 because 3>2. We will also assume that the bids have to be integers. So, a bid can be 0,1.2.3. but it cannot be 3.67 or 5.2. Let the three bidders valuations of the object be vi-$10, v2-$15, v3-s20 Let the bids made by the three bidders be: (b1,b2.b3) (a) is the case when (b1,b2.b3)-(0,15,15) a Nash equilibrium? Explain why it is or it is not a Nash equilibrium. (b) is the case when (b1.b2.b3)-(0,14.15) a Nash equilibrium? Explain why it is or it is not a Nash equilibrium.

Consider a first-price auction to sell an object in which there are 3 bidders. Recall that in a first-price auction, the bidder who makes the highest bid wins. And the price he pays for the object is equal to his bid. Here, we also assume that if there is a tie, the bidder with the biggest index wins. For instance, if (b1.b2.b3)-(5,6,6), bidders 2 and 3 make the highest bids. The bidder who wins the object is bidder 3 because 3>2. We will also assume that the bids have to be integers. So, a bid can be 0,1.2.3. but it cannot be 3.67 or 5.2. Let the three bidders valuations of the object be vi-$10, v2-$15, v3-s20 Let the bids made by the three bidders be: (b1,b2.b3) (a) is the case when (b1,b2.b3)-(0,15,15) a Nash equilibrium? Explain why it is or it is not a Nash equilibrium. (b) is the case when (b1.b2.b3)-(0,14.15) a Nash equilibrium? Explain why it is or it is not a Nash equilibrium.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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