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- The Federal Communications Commission (FCC) has hired you as a consultant to design an auction to sell wireless spectrum rights. The FCC indicates that its goal of using auctions to sell these spectrum rights is to generate revenue. Since most bidders are large telecommunications companies, you rationally surmise that all participants in the auction are risk neutral. Which auction type—first-price, second-price, English, or Dutch—would you recommend if all bidders value spectrum rights identically but have different estimates of the true underlying value of spectrum rights?The Federal Communications Commission (FCC) has hired you as a consultant to design an auction to sell wireless spectrum rights. The FCC indicates that its goal of using auctions to sell these spectrum rights is to generate revenue. Since most bidders are large telecommunications companies, you rationally surmise that all participants in the auction are risk neutral. Which auction type—first-price, second-price, English, or Dutch—would you recommend if all bidders value spectrum rights identically but have different estimates of the true underlying value of spectrum rights? Kindly give a brief one-page description as part of the assignment.You are a bidder in an independent private values auction, and you value the object at $4,500. Each bidder perceives that valuations are uniformly distributed between $1,000 and $10,000. Determine your optimal bidding strategy in a first-price, sealed-bid auction when the total number of bidders (including you) is: a. 2 bidders.Bid: $ b. 10 bidders.Bid: $ c. 100 bidders.Bid: $
- 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?You are a bidder in an independent private values auction, and you value the object at $4,000. Each bidder perceives that valuations are uniformly distributed between $1,500 and $9,000. Determine your optimal bidding strategy in a first-price, sealed-bid auction when the total number of bidders (including you) is: a. 2. b. 10. c. 100In the late 1990s, car leasing was very popular in the United States. A customer would lease a car from the manufacturer for a set term, usually two years, and then have the option of keeping the car. If the customer decided to keep the car, the customer would pay a price to the manufacturer, the “residual value,” computed as 60% of the new car price. The manufacturer would then sell the returned cars at auction. In 1999, manufacturers lost an average of $480 on each returned car (the auction price was, on average, $480 less than the residual value). Suppose two customers have leased cars from a manufacturer. Their lease agreements are up, and they are considering whether to keep (and purchase at 60% of the new car price) their cars or return their cars. Two years ago, Dina leased a car valued new at $19,000. If she returns the car, the manufacturer could likely get $13,300 at auction for the car. Gilberto also leased a car, valued new at $13,000, two years ago. If he returns the…
- In the late 1990s, car leasing was very popular in the United States. A customer would lease a car from the manufacturer for a set term, usually two years, and then have the option of keeping the car. If the customer decided to keep the car, the customer would pay a price to the manufacturer, the “residual value,” computed as 60% of the new car price. The manufacturer would then sell the returned cars at auction. In 1999, manufacturers lost an average of $480 on each returned car (the auction price was, on average, $480 less than the residual value). Suppose two customers have leased cars from a manufacturer. Their lease agreements are up, and they are considering whether to keep (and purchase at 60% of the new car price) their cars or return their cars. Two years ago, Susan leased a car that was valued new at $14,500. If she returns the car, the manufacturer could likely get $7,540 at auction for the car. Megan also leased a car, valued new at $15,500, two years ago. If she returns…In the late 1990s, car leasing was very popular in the United States. A customer would lease a car from the manufacturer for a set term, usually two years, and then have the option of keeping the car. If the customer decided to keep the car, the customer would pay a price to the manufacturer, the “residual value,” computed as 60% of the new car price. The manufacturer would then sell the returned cars at auction. In 1999, manufacturers lost an average of $480 on each returned car (the auction price was, on average, $480 less than the residual value). Suppose two customers have leased cars from a manufacturer. Their lease agreements are up, and they are considering whether to keep (and purchase at 60% of the new car price) their cars or return their cars. Two years ago, Antonio leased a car that was valued new at $11,000. If he returns the car, the manufacturer could likely get $5,610 at auction for the car. Valerie also leased a car, valued new at $19,500, two years ago. If she…The FCC has hired you as a consultant to design an auction to sell wireless spectrum rights. The FCC indicates that its goal of using auctions to sell these spectrum rights is to generate revenue. Since most bidders are large telecommunications companies, you rationally surmise that all participants in the auction are risk neutral. Which auction type—first-price, second-price, English, or Dutch—would you recommend if all bidders value spectrum rights identically but have different estimates of the true underlying value of spectrum rights? Explain
- Consider two bidders – Alice and Bob who are bidding for a second-hand car. Each of them knows the private value she/he assigns to the car, but does not know the exact value of others. It is common knowledge that the value of other bidders is randomly drawn from a uniform distribution between 0 and $10000. Assume that Alice values the car at $8500 and Bob values the car at $4500. a) If Alice and Bob participated in the second-price sealed bid auction, what would they bid and what would be the result of the auction? Explain your answer. b) If they participate instead in a first-price sealed bid auction, what would they bid and what would be the result of the auction? Explain your answer. c) Calculate and compare the revenue of the seller in the above situations. Which type of auction should the seller use? Explain your answerDescribe a decision a company has made when facing uncertainty. Compute the expected costs and benefits of the decision. Offer advice on how to proceed. Compute the profit consequences of the advice 2. Identify something you buy or sell that could be bought or sold using an auction. How would you run the auction? Do a benefit-cost analysis of the auction relative to how you currently buy or sell.When a famous painting becomes available for sale, it is often known which museum or collector will be the likely winner. Yet, the auctioneer actively woos representatives of other museums that have no chance of winning to attend anyway. Suppose a piece of art has recently become available for sale and will be auctioned off to the highest bidder, with the winner paying an amount equal to the second highest bid. Assume that most collectors know that Valerie places a value of $15,000 on the art piece and that she values this art piece more than any other collector. Suppose that if no one else shows up, Valerie simply bids $15,000/2=$7,500 and wins the piece of art. The expected price paid by Valerie, with no other bidders present, is $________.. Suppose the owner of the artwork manages to recruit another bidder, Antonio, to the auction. Antonio is known to value the art piece at $12,000. The expected price paid by Valerie, given the presence of the second bidder Antonio, is $_______. .
