Say that you are bidding in a sealed-bid auction and that you really want the item being auctioned. Winning it would be worth $500 to you. Say you expect the next-highest bidder to bid $300.a. In a standard “highest-bid” auction, what bid would a rational person make?The rational choice is to bid $500 since that is what the item is worth to you.The rational choice is to bid a little bit more than $300 because that is the expected next-highest bid.The rational choice is to bid just under $500 so that you have a higher chance of winning the auction and would still have a net benefit.The rational choice is to bid over $500 to guarantee that you win the item.b. In a Vickrey auction, what bid would he make?The rational choice is to bid slightly more than $500.The rational choice is to bid $500.The rational choice is to bid slightly less than $500.The rational choice is to bid slightly more than $300.

a. The highest bid-auction is the process of auctioning the commodity or service to the one who…

Answered: Say that you are bidding in a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Say that you are bidding in a sealed-bid auction and that you really want the item being auctioned. Winning it would be worth $500 to you. Say you expect the next-highest bidder to bid $300.

a. In a standard “highest-bid” auction, what bid would a rational person make?

The rational choice is to bid $500 since that is what the item is worth to you.
The rational choice is to bid a little bit more than $300 because that is the expected next-highest bid.
The rational choice is to bid just under $500 so that you have a higher chance of winning the auction and would still have a net benefit.
The rational choice is to bid over $500 to guarantee that you win the item.

b. In a Vickrey auction, what bid would he make?

The rational choice is to bid slightly more than $500.
The rational choice is to bid $500.
The rational choice is to bid slightly less than $500.
The rational choice is to bid slightly more than $300.

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