Microeconomics
Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Chapter 20, Problem 7IP
To determine

The wealth distribution to change over time.

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Discrete All-Pay Auction: In Section 6.1.4 we introduced a version of an all- pay auction that worked as follows: Each bidder submits a bid. The highest bidder gets the good, but all bidders pay their bids. Consider an auction in which player 1 values the item at 3 while player 2 values the item at 5. Each player can bid either 0, 1, or 2. If player i bids more than player j then i wins the good and both pay. If both players bid the same amount then a coin is tossed to determine who gets the good, but again both pay. a. Write down the game in matrix form. Which strategies survive IESDS? b. Find the Nash equilibria for this game.
In a sealed-bid, second-price auction with complete information, the winner is the bidder who submits the second-highest price, but pays the price submitted by the highest bidder. Do you agree? Explain.
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