(a) (5 points) How would bidders bid in this second-price auction? (b) (5 points) Calculate the expected value created and expected auctioneer's revenue in this auction (Hint: you can think about bidder 2's value coming with 1/3 probability from U[0, 100], and with 2/3 probability from U[100, 300]) (c) (5 points) Calculate expected payoff for each bidder. Now suppose that the auctioneer gives a 2/3 subsidy to bidder 1 (i.e., upon winning, bidder 1 only needs to pay 1/3 of the required payment) (d) (5 points) How would bidders bid in this second-price auction with subsidies? (e) (5 points) Calculate the expected value created and expected auctioneer's revenue in this auction. (f) (5 points) Calculate expected payoff for each bidder. Q4 (30 points) Subsidy in Auctions Consider a sealed-bid second-price auction with two bidders. Valuation of bidder 1 is drawn from the uniform distribution on [0, 100], and valuation of bidder 2 is independently drawn from the uniform distribution on [0, 300].
(a) (5 points) How would bidders bid in this second-price auction? (b) (5 points) Calculate the expected value created and expected auctioneer's revenue in this auction (Hint: you can think about bidder 2's value coming with 1/3 probability from U[0, 100], and with 2/3 probability from U[100, 300]) (c) (5 points) Calculate expected payoff for each bidder. Now suppose that the auctioneer gives a 2/3 subsidy to bidder 1 (i.e., upon winning, bidder 1 only needs to pay 1/3 of the required payment) (d) (5 points) How would bidders bid in this second-price auction with subsidies? (e) (5 points) Calculate the expected value created and expected auctioneer's revenue in this auction. (f) (5 points) Calculate expected payoff for each bidder. Q4 (30 points) Subsidy in Auctions Consider a sealed-bid second-price auction with two bidders. Valuation of bidder 1 is drawn from the uniform distribution on [0, 100], and valuation of bidder 2 is independently drawn from the uniform distribution on [0, 300].
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter18: Auctions
Section: Chapter Questions
Problem 9MC
Related questions
Question
![(a) (5 points) How would bidders bid in this second-price auction?
(b) (5 points) Calculate the expected value created and expected auctioneer's revenue in
this auction (Hint: you can think about bidder 2's value coming with 1/3 probability
from U[0, 100], and with 2/3 probability from U[100, 300])
(c) (5 points) Calculate expected payoff for each bidder.
Now suppose that the auctioneer gives a 2/3 subsidy to bidder 1 (i.e., upon winning, bidder
1 only needs to pay 1/3 of the required payment)
(d) (5 points) How would bidders bid in this second-price auction with subsidies?
(e) (5 points) Calculate the expected value created and expected auctioneer's revenue in
this auction.
(f) (5 points) Calculate expected payoff for each bidder.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdeb1dc9e-2b7f-4b64-95e3-e16da8f1644d%2F9003dd25-6acc-4ef5-b9b4-334ee080bd0b%2Fsd3vb88_processed.jpeg&w=3840&q=75)
Transcribed Image Text:(a) (5 points) How would bidders bid in this second-price auction?
(b) (5 points) Calculate the expected value created and expected auctioneer's revenue in
this auction (Hint: you can think about bidder 2's value coming with 1/3 probability
from U[0, 100], and with 2/3 probability from U[100, 300])
(c) (5 points) Calculate expected payoff for each bidder.
Now suppose that the auctioneer gives a 2/3 subsidy to bidder 1 (i.e., upon winning, bidder
1 only needs to pay 1/3 of the required payment)
(d) (5 points) How would bidders bid in this second-price auction with subsidies?
(e) (5 points) Calculate the expected value created and expected auctioneer's revenue in
this auction.
(f) (5 points) Calculate expected payoff for each bidder.
![Q4 (30 points)
Subsidy in Auctions
Consider a sealed-bid second-price auction with two bidders. Valuation of bidder 1 is drawn
from the uniform distribution on [0, 100], and valuation of bidder 2 is independently drawn
from the uniform distribution on [0, 300].](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdeb1dc9e-2b7f-4b64-95e3-e16da8f1644d%2F9003dd25-6acc-4ef5-b9b4-334ee080bd0b%2Fiw3057e_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Q4 (30 points)
Subsidy in Auctions
Consider a sealed-bid second-price auction with two bidders. Valuation of bidder 1 is drawn
from the uniform distribution on [0, 100], and valuation of bidder 2 is independently drawn
from the uniform distribution on [0, 300].
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