Let vij be bidder i's valuation for object j, where i in {1,2,3} and j in {1,2}. Bidder i knows its valuation vi; but other bidders only know that vi; is drawn uniformly from [0, 100]. If bidder i wins object 1 at price p1 and object 2 at price p2, bidder i's payoff is v;1 If bidder i wins only object j at price p;, his payoff is vij – Pj. If bidder i does not win any object, his payoff is 0.   The auction proceeds as follows. The initial prices are zero for both objects. All bidders sit in front of their computers and observe the prices for both items in real-time. Initially, all bidders are invited to enter the bidding race for both items. At any moment in time, each bidder has the option to withdraw from the bidding race for either object or both. If a bidder withdraws from the bidding for one object, he can no longer get back to the bidding for that object, but he can stay in the bidding race for the other object if he hasn't withdrawn from it previously. The price for an object increases continuously over time as long as there are two or three bidders in the race for that object. The rate of price increase is 1; that is to say, the price increases to x if x units of time has passed, where x is a real number. The price for an object stops increasing if there is at most one bidder left for the bidding race for the object, and the price will stay at that level for the rest of the game; we say the price is locked in this case. (the price for the other object will continue to increase if more than one bidder stays in the bidding race for that object). The auction ends as soon as both prices stop increasing (i.e., at most one bidder remains in the bidding race for each object). An object is sold to the bidder (if any) who remains in the bidding race for that object at the locked price.   1. What should a bidder do if his valuations for the two objects are 50 and 60; respectively? Explain your answer.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question

Let vij be bidder i's valuation for object j, where i in {1,2,3} and j in {1,2}. Bidder i knows its valuation vi; but other bidders only know that vi; is drawn uniformly from [0, 100]. If bidder wins object 1 at price p1 and object 2 at price p2, bidder i's payoff is v;1 If bidder i wins only object j at price p;, his payoff is vij – Pj. If bidder i does not win any object, his payoff is 0.

 

The auction proceeds as follows. The initial prices are zero for both objects. All bidders sit in front of their computers and observe the prices for both items in real-time. Initially, all bidders are invited to enter the bidding race for both items. At any moment in time, each bidder has the option to withdraw from the bidding race for either object or both. If a bidder withdraws from the bidding for one object, he can no longer get back to the bidding for that object, but he can stay in the bidding race for the other object if he hasn't withdrawn from it previously. The price for an object increases continuously over time as long as there are two or three bidders in the race for that object. The rate of price increase is 1; that is to say, the price increases to x if x units of time has passed, where x is a real number. The price for an object stops increasing if there is at most one bidder left for the bidding race for the object, and the price will stay at that level for the rest of the game; we say the price is locked in this case. (the price for the other object will continue to increase if more than one bidder stays in the bidding race for that object). The auction ends as soon as both prices stop increasing (i.e., at most one bidder remains in the bidding race for each object). An object is sold to the bidder (if any) who remains in the bidding race for that object at the locked price.

 

1. What should a bidder do if his valuations for the two objects are 50 and 60; respectively? Explain your answer.

Expert Solution
steps

Step by step

Solved in 3 steps with 2 images

Blurred answer
Knowledge Booster
Personal Valuation
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education