Consider an auction for a single item. There are two bidders. Each bidder has a privately known value, drawn from a uniform distribution on [0,100]. Suppose the bidders are asked to submit sealed bids. The high bidder wins the auction, and is required to pay the average of the winning and the losing bid. (a) Solve for the Bayesian Nash equilibrium. (b) Compare the expected auction revenue to the the first price and second price sealed bid auctions (as discussed in class).
Consider an auction for a single item. There are two bidders. Each bidder has a privately known value, drawn from a uniform distribution on [0,100]. Suppose the bidders are asked to submit sealed bids. The high bidder wins the auction, and is required to pay the average of the winning and the losing bid. (a) Solve for the Bayesian Nash equilibrium. (b) Compare the expected auction revenue to the the first price and second price sealed bid auctions (as discussed in class).
Chapter1: Making Economics Decisions
Section: Chapter Questions
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![2. Consider an auction for a single item. There are two bidders. Each bidder
has a privately known value, drawn from a uniform distribution on [0,100].
Suppose the bidders are asked to submit sealed bids. The high bidder
wins the auction, and is required to pay the average of the winning and
the losing bid.
(a) Solve for the Bayesian Nash equilibrium.
(b) Compare the expected auction revenue to the the first price and
second price sealed bid auctions (as discussed in class).](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F65a8d630-2028-4855-ad65-5d3a70945ca6%2Fd3606dfb-77c7-4a2e-8097-b68a902b5b83%2Flpcbf4h_processed.jpeg&w=3840&q=75)
Transcribed Image Text:2. Consider an auction for a single item. There are two bidders. Each bidder
has a privately known value, drawn from a uniform distribution on [0,100].
Suppose the bidders are asked to submit sealed bids. The high bidder
wins the auction, and is required to pay the average of the winning and
the losing bid.
(a) Solve for the Bayesian Nash equilibrium.
(b) Compare the expected auction revenue to the the first price and
second price sealed bid auctions (as discussed in class).
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