EBK MICROECONOMICS
2nd Edition
ISBN: 8220103679701
Author: List
Publisher: YUZU
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Chapter 17, Problem 5Q
To determine
The meaning and economic relevance of sniping in an auction.
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PJ has been owning a City Golf, model 2004 for the past 15 years and now plans to sell it. Town auctioneers has offered to sell his car at their next auction. This is the first time PJ is hearing at an auction.
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Hello, please help me to solve this question in Game Theory. Thanks in advance!Consider a first price sealed-bid auction of an object with two bidders. Each bidder i’s valuation of the object is vi, which is known to both bidders. The auction rules are that each player submits a bid in a sealed envelope. The envelopes are then opened, and the bidder who has submitted the highest bid gets the object and pays the auctioneer the amount of his bid. If the bidders submit the same bid, each gets the object with probability 0.5. Bids must be integers.
Find a Nash equilibrium for this game and show whether it is unique.
10
Use the expected value information to illustrate how having more bidders in an oral auction will likely result in a higher winning bid.
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