Consider a sealed-bid auction in which the seller draws one of the N bids at random. The buyer whose bid was drawn wins the auction and pays the amount bid. Assume that buyer valuations follow a uniform(0,1) distribution. 1. What is the symmetric equilibrium bidding strategy b(v)? 2. What is the seller’s expected revenue? 3. Why doesn’t this auction pay the seller the same revenue as the four standard auctions? That is, why doesn’t the revenue equivalence theorem apply here?

Consider a sealed-bid auction in which the seller draws one of the N bids at random. The buyer whose bid was drawn wins the auction and pays the amount bid. Assume that buyer valuations follow a uniform(0,1) distribution. 1. What is the symmetric equilibrium bidding strategy b(v)? 2. What is the seller’s expected revenue? 3. Why doesn’t this auction pay the seller the same revenue as the four standard auctions? That is, why doesn’t the revenue equivalence theorem apply here?

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 8E

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