Explain why a player in a sealed-bid, second-price auction would never submit a bid that exceeds his or her true value of the object being sold. (Hint: What if all players submitted bids greater than their valuations of the object?)

Explain why a player in a sealed-bid, second-price auction would never submit a bid that exceeds his or her true value of the object being sold. (Hint: What if all players submitted bids greater than their valuations of the object?)

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 1MC

See similar textbooks

Related questions

Q: Consider an English auction with 3 bidders having the valuations v1=12, v2=7, and v3=9. What will be…

A: The auctions are the way to sell the exclusive goods and services to the people who are interested…

Q: Consider a sealed-bid auction in which the seller draws one of the N bids at random. The buyer whose…

A: Sealed-bid auctions refer to auctions where other bidders do not know what others have paid for the…

Q: as a consultant to design an auction to sell wireless spectrum rights. The FCC indicates that its…

A: *Answer: An English Auction, also called an open cry ascending auction, begins with an auctioneer…

Q: Why it is unwise to bid less than your valuation of the good in a sealed bid second-price auction.

A: Note:- Since we can only answer one question at a time so, we'll answer the first one. Please repost…

Q: 7. In a first price sealed bid auction with 2 bidders, let v; be the valuation of bidder i and b; be…

A: In the first price sealed bid auction, person i will win and pay his bid i.e. bi Now, the…

Q: Question A: What is the expected payoff to P1 from choosing A? Question B: What is the expected…

A: Game Theory is defined as a concept which studies the ways and methods in which the choices of…

Q: If some auction participants for crude-oil field leases have estimates that the oil in the ground is…

A: $1.3 million is the true common value as it is the common value in all the auctions that are made.

Q: What amount does each bidder bid in the Bayesian Nash equilibrium of a 2nd price auction? The…

A: Each advertiser offers a fixed amount per impression, which is compared to the other available bids,…

Q: A first-price auction with a reserve price is a type of auction very similar to the first-price…

A: Reservation price: Reservation prices are the lowest prices sellers are willing to accept from…

Q: Player 1 Player ир down 2 Left -5,-5 -6,0 right 0₁-6 -1, - Q₁ Find риче strategy nash equilibrium.…

A: According to the notion of Nash equilibrium from game theory, the best result in a game occurs when…

Q: What kind of game (according to outcome and sequence) is Crandall proposing to Putnam? 2. If Putnam…

A: Oligopoly: It refers to the firms that will work together if they want earn more profits. It refers…

Q: Consider a 4-bidder auction model. The auction is second price sealed bid. However, now, the bidders…

A: Answer-

Q: Say that you are bidding in a sealed-bid auction and that you really want the item being auctioned.…

A: a. The highest bid-auction is the process of auctioning the commodity or service to the one who…

Q: You are a bidder in an independent private auction, and you value the object at $2000. Each bidder…

A: A bidding strategy where you set an average for how much you're willing to pay for every thousand…

Q: Is the following statement true? "5 bidders with private values uniformly distributed between 0 and…

A: In-game theory, symmetric equilibrium is an equilibrium where all players utilize a similar…

Q: Your company is competing in a sealed-bid auction for a package of items your company values at…

A: Uniform distribution is defined as the type of probability distribution where all the outcomes are…

Q: You are a bidder in an independent private values auction, and you value the object at $4,000. Each…

A: a. When the total number of bidders is 2, then the optimal bid can be calculated as follows: Thus,…

Q: Consider a standard position auction. There are three positions: Top (T), Middle (M) and Bottom (B).…

A: Second Price Auction Second Price Auction is the auction in which the highest bidder wins the…

Q: Consider a first-price sealed-bid auction of a single object with two bidders j = 1, 2. Bidder 1' s…

A: V1=2, V2=5 Two bidders so the probability will be 1/2 for each to win the bid. If 1st bidder wins…

Q: alculate the value of the following infinitely repeated string of payoffs. 5 + 0.8*5 + 0.82*5 +…

A: Hi there , as per our guidelines we are only allowed to solve 1 question with 3 sub parts at maximum…

Q: 4. Consider a first-price, sealed-bid auction in which the bidders' valuations are independently and…

A: * ANSWER :- *(4)

Q: 4. An individual has an object that is of no value to him. The individual wants to sell the object…

A: Answer - Second price Auction - Second price auction are the auction where the winner of the auction…

Q: 1. The following two examples show that truthful bidding is not a dominant strategy in the first-…

A: Answer-

Q: Consider the following bargaining game between an employee and a manager. Manager Strong Weak…

A: The Nash bargaining game is a two-player game that simulates negotiation settings.

Q: Question 3: Auction Theory a) What is the difference between a common value auction and a private…

A: Economics as a subject was developed since there was a limited amount of resources on earth. It…

Q: Explain whether the statement is true or false and explain why? Statement 1: If a game has a Pareto…

A: Nash equilibrium is a concept within game theory where the optimal outcome of a game is where there…

Q: Suppose there are three bidders with values for the object that are independent, private and…

A: Uniform distribution In statistics, it refers to a type of probability distribution where all…

Q: (B). Position T receives rT = 150 clicks per day, positio n B receives xB = 50 clicks per day. There…

A: *Answer: Second Price Auction Second Price Auction is the auction in which the highest bidder wins…

Q: Consider the following situation: five individuals are participating in an auction for an old…

A: Profits or surplus is the excess of revenue receiptes earned over the costs incurred by an…

Q: An object is sold in a first-price auction – thus, the highest bidder wins the object and price is…

A: Given information There are two players: Odd Bidder(Player 1) & Even Bidder (Player 2)…

Q: Consider a first-price auction to sell an object in which there are 3 bidders. Recall that in a…

A: Recall that a Nash equilibrium is where, given other player's actions, no player has a profitable…

Q: What type of online auction includes one seller and many buyers Select one: a. reverse auction O b.…

A: Auction refers to the process of selling good through public sale and sells to the highest bidder.

Q: You are one of five risk-neutral bidders participating in an independent private values auction.…

A: The formula for optimal bidding strategy by any player, b= v - (v-L)/n Where L lowest valuation n…

Q: Player 2 t1 t2 t3 Player 1 S1 3, 4 1, 0 5, 3 S2 0, 12 8, 12 4, 20 S3 2, 0 2, 11 1, 0 Suppose…

A: 1) In the game above, player 2 does not have a dominant strategy. Dominant strategy is the one which…

Q: Why do sellers generally prefer a Vickrey auction to a regular sealed bid if sellers don’t receive…

A: The auctions are conducted by the people or the sellers who possess the valuable commodities. The…

Q: Consider an all-pay, sealed-bid auction where the item goes to the highest bidder and all of the…

Q: First-mover advantage is more important, Multiple Choice than in a repeated sequential game; in a…

A: "Since you have asked multiple questions, we will solve first question for you .. If you want any…

Q: Consider a first-price sealed-bid auction of a single object with two bidders į = 1, 2. Bidder 1's…

A: V1=2, V2=5 Two bidders so the probability will be 1/2 for each to win the bid. If 1st bidder wins…

Question

Expert Solution

Step 1

Sealed Bid:

A sealed bid is a process in which the price of the goods is bid under the sealed packet and the bidder does not have the idea of other bidders’ bid.

Step by step

Solved in 2 steps

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Use the expected value information to illustrate how having more bidders in an oral auction will likely result in a higher winning bid.
How to solve this question? Consider an antique auction where bidders have independent private values. There are two bidders, each of whom perceives that valuations are uniformly distributed between $100 and $1,000. One of the bidders is Sue, who knows her own valuation is $200. What is Sue's optimal bidding strategy in a Dutch auction?
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.
See attachments for question context. Question: Some people advocated the following modifiction of the auction rule. A bidder cannot bid for only one object, i.e., if at some point in time he withdraws from the bidding race for one object, he automatically withdraws the race for the other object. Every other aspect of the auction, including how prices increase over time, does not change. What should a bidder do if his valuation for the two objects are 50 and 60, respectively? Explain. Does the auction lead to an efficient allocation? Explain.
Say that you are bidding in a sealed-bid auction and that you really want the item being auctioned. Winning it would be worth $500 to you. Say you expect the next-highest bidder to bid $300.a. In a standard “highest-bid” auction, what bid would a rational person make? The rational choice is to bid $500 since that is what the item is worth to you. The rational choice is to bid a little bit more than $300 because that is the expected next-highest bid. The rational choice is to bid just under $500 so that you have a higher chance of winning the auction and would still have a net benefit. The rational choice is to bid over $500 to guarantee that you win the item. b. In a Vickrey auction, what bid would he make? The rational choice is to bid slightly more than $500. The rational choice is to bid $500. The rational choice is to bid slightly less than $500. The rational choice is to bid slightly more than $300.
Consider the following game 1\2 Y Z A 10,2 3,9 B 8,5 6,1 Suppose Player 2 holds the following belief about Player 1: θ1 (A,B) = (1/3,2/3) What is the expected payoff from playing ‘Y’ ? What is the expected payoff from playing ‘Z’ ? Based on these beliefs, Player 2 should respond by playing ____
A first-price auction with a reserve price is a type of auction very similarto the first-price auctions we discussed in class. The only different is that, in order for a bidder to win the object, their bid must be at least equal to the reserve price. If all bidders submit bids strictly less than the reserve price, then the auctioneer keeps the object and nobody pays anything. Suppose that Anna participates in a first-price auction with a reserve price equal to $20 and her valuation of the good is $50. Which bids are weakly dominated for Anna?
Why it is unwise to bid less than your valuation of the good in a sealed bid second-price auction. In the first price sealed bid auction, a player gets a positive payoff by doing bid shading. Explain the tradeoff between biding lower than the value of the object and biding very close to value of the object.
Consider a game where there is a $2,520 prize if a player correctly guesses the outcome of a fair 7-sided die roll.Cindy will only play this game if there is a nonnegative expected value, even with the risk of losing the payment amount.What is the most Cindy would be willing to pay?
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…
5 Consider a first-price sealed-bid auction in which bidders valuations are independently and identically distributed according to the Uniform distribution on the interval [0, 1]. Explain what the rules of the First Price Sealed bid auction are. Set it up as a Bayesian game. Compute a symmetric Bayesian Nash equilibrium for the two bidder case.
Your company is competing in a sealed-bid auction for a package of items your company values at $30,000. You expect the bids to be uniformly distributed between $20,000 and $30,000. a. Fill in the following table Bid Profit P(Win)Competitors = 2 E(Profit)Competitors = 2 P(Win)Competitors = 3 E(Profit)Competitors = 3 $20,000 $22,000 $24,000 $26,000 $28,000 $30,000 b. If there are two competitors, what is the optimal bid? c. If there are three competitors, what is the optimal bid?