PLEASE CHECK THIS HOW TO SOLVE PLEASE TEACH EXPLAIN STEP BY STEP EXERCISE 87.1 (Multi-unit auctions) Two units of an object are available. Thereare n bidders. Bidder i values the first unit that she obtains at v; and the secondunit at w₁, where vi > w; > 0. Each bidder submits two bids; the two highestbids win. Retain the tie-breaking rule in the text. Show that in discriminatory anduniform-price auctions, player i's action of bidding v; and w; does not dominateall her other actions, whereas in a Vickrey auction it does. (In the case of a Vickreyauction, consider separately the cases in which the other players' bids are such thatplayer i wins no units, one unit, and two units when her bids are v; and w;.)

An auction is a market mechanism in which goods or assets are sold to the highest bidder. Auctions…

Answered: are n bidders. Bidder i values the…

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 2MC

See similar textbooks

Similar questions

Explain the differce between oral auctions and second-price auctions
Consider a Common Value auction with two bidders who both receive a signal X that is uniformly distributed between 0 and 1. The (common) value V of the good the players are bidding for is the average of the two signals, i.e. V = (X1+X2)/2. the symmetric Nash equilibrium bidding strategy for the second-price sealed-bid auction assuming that players are risk-neutral and have standard selfish preferences. Furthermore, you may assume that the other bidder is following a linear bidding strategy. Make sure to explain your notation and the steps you take to derive the result.
Suppose two bidders compete for a single indivisible item (e.g., a used car, a piece of art, etc.). We assume that bidder 1 values the item at $v1, and bidder 2 values the item at $v2. We assume that v1 > v2. In this problem we study a second price auction, which proceeds as follows. Each player i = 1, 2 simultaneously chooses a bid bi ≥ 0. The higher of the two bidders wins, and pays the second highest bid (in this case, the other player’s bid). In case of a tie, suppose the item goes to bidder 1. If a bidder does not win, their payoff is zero; if the bidder wins, their payoff is their value minus the second highest bid. a) Now suppose that player 1 bids b1 = v2 and player 2 bids b2 = v1, i.e., they both bid the value of the other player. (Note that in this case, player 2 is bidding above their value!) Show that this is a pure NE of the second price auction. (Note that in this pure NE the player with the lower value wins, while in the weak dominant strategy equilibrium where both…

Recommended textbooks for you

Managerial Economics: A Problem Solving Approach

Economics

ISBN:

9781337106665

Author:

Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:

Cengage Learning

Microeconomic Theory

Economics

ISBN:

9781337517942

Author:

NICHOLSON

Publisher:

Cengage

Exploring Economics

Economics

ISBN:

9781544336329

Author:

Robert L. Sexton

Publisher:

SAGE Publications, Inc

Managerial Economics: A Problem Solving Approach

Economics

ISBN:

9781337106665

Author:

Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:

Cengage Learning

Microeconomic Theory

Economics

ISBN:

9781337517942

Author:

NICHOLSON

Publisher:

Cengage

Exploring Economics

Economics

ISBN:

9781544336329

Author:

Robert L. Sexton

Publisher:

SAGE Publications, Inc

ECON MICRO

Economics

ISBN:

9781337000536

Author:

William A. McEachern

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS