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).

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 18.1IP

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