4. An individual has an object that is of no value to him. The individual wants to sell the object using the mechanism of a second- price sealed-bid auction. There are 5 potential buyers of the object, and their valuations e, i = 1, .., 5, for the object are given by (Buyer e, 1 0.702073 2 0.0287321 0.0307755 4 0.0360476 0.82077 (a) Which buyer wins the auction, and how much does he pay? (b) If the owner of the object uses the mechanism of a first-price sealed-bid auction, how much does he obtain for selling the object? In answering this question, assume that a potential buyer uses a linear bidding strategy and thinks that the valuation for the object of anyone of the competitors is uniformly distributed on the unit interval [0, 1] and that these valuations are indepen- dent random variables.
4. An individual has an object that is of no value to him. The individual wants to sell the object using the mechanism of a second- price sealed-bid auction. There are 5 potential buyers of the object, and their valuations e, i = 1, .., 5, for the object are given by (Buyer e, 1 0.702073 2 0.0287321 0.0307755 4 0.0360476 0.82077 (a) Which buyer wins the auction, and how much does he pay? (b) If the owner of the object uses the mechanism of a first-price sealed-bid auction, how much does he obtain for selling the object? In answering this question, assume that a potential buyer uses a linear bidding strategy and thinks that the valuation for the object of anyone of the competitors is uniformly distributed on the unit interval [0, 1] and that these valuations are indepen- dent random variables.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![4. An individual has an object that is of no value to him. The individual wants to sell the object using the mechanism of a second-
price sealed-bid auction. There are 5 potential buyers of the object, and their valuations e, i = 1, ..., 5, for the object are given by
( Buyer
1
0.702073
2
0.0287321
3
0.0307755
4
0.0360476
0.82077
(a) Which buyer wins the auction, and how much does he pay?
(b) If the owner of the object uses the mechanism of a first-price sealed-bid auction, how much does he obtain for selling the
object? In answering this question, assume that a potential buyer uses a linear bidding strategy and thinks that the valuation for
the object of anyone of the competitors is uniformly distributed on the unit interval [0, 1] and that these valuations are indepen-
dent random variables.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2a892482-b2ec-4850-b902-5c42e2566e8b%2F7a202265-e950-4c12-b2bf-de8e6ac4994b%2Fe3v1wbg_processed.jpeg&w=3840&q=75)
Transcribed Image Text:4. An individual has an object that is of no value to him. The individual wants to sell the object using the mechanism of a second-
price sealed-bid auction. There are 5 potential buyers of the object, and their valuations e, i = 1, ..., 5, for the object are given by
( Buyer
1
0.702073
2
0.0287321
3
0.0307755
4
0.0360476
0.82077
(a) Which buyer wins the auction, and how much does he pay?
(b) If the owner of the object uses the mechanism of a first-price sealed-bid auction, how much does he obtain for selling the
object? In answering this question, assume that a potential buyer uses a linear bidding strategy and thinks that the valuation for
the object of anyone of the competitors is uniformly distributed on the unit interval [0, 1] and that these valuations are indepen-
dent random variables.
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