4. An individual has an object that is of no value to him. The individual wants to sell the object using the mechanism of a second- price sealed-bid auction. There are 5 potential buyers of the object, and their valuations e, i = 1, .., 5, for the object are given by (Buyer e, 1 0.702073 2 0.0287321 0.0307755 4 0.0360476 0.82077 (a) Which buyer wins the auction, and how much does he pay? (b) If the owner of the object uses the mechanism of a first-price sealed-bid auction, how much does he obtain for selling the object? In answering this question, assume that a potential buyer uses a linear bidding strategy and thinks that the valuation for the object of anyone of the competitors is uniformly distributed on the unit interval [0, 1] and that these valuations are indepen- dent random variables.
4. An individual has an object that is of no value to him. The individual wants to sell the object using the mechanism of a second- price sealed-bid auction. There are 5 potential buyers of the object, and their valuations e, i = 1, .., 5, for the object are given by (Buyer e, 1 0.702073 2 0.0287321 0.0307755 4 0.0360476 0.82077 (a) Which buyer wins the auction, and how much does he pay? (b) If the owner of the object uses the mechanism of a first-price sealed-bid auction, how much does he obtain for selling the object? In answering this question, assume that a potential buyer uses a linear bidding strategy and thinks that the valuation for the object of anyone of the competitors is uniformly distributed on the unit interval [0, 1] and that these valuations are indepen- dent random variables.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter15A: Auction Design And Information Economics
Section: Chapter Questions
Problem 7E
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