Consider allocating an object to one of two players when each player's preferences are her private information. Player 1's value for the object, denoted by v1 is drawn from a continuous distribution with [1;2] as its support. Player 2's value for the object, denoted by v2, is likewise drawn from the interval [0;1]. 1. What is the equilibrium in dominant strategies if a second price auction is used to allocate the object. Is the outcome ex-post efficient? 2. For what pairs (v1;v2) should Player 1 and Player 2 respectively be allocated the object in a mechanism that maximizes expected revenue for the seller?
Consider allocating an object to one of two players when each player's preferences are her private information. Player 1's value for the object, denoted by v1 is drawn from a continuous distribution with [1;2] as its support. Player 2's value for the object, denoted by v2, is likewise drawn from the interval [0;1]. 1. What is the equilibrium in dominant strategies if a second price auction is used to allocate the object. Is the outcome ex-post efficient? 2. For what pairs (v1;v2) should Player 1 and Player 2 respectively be allocated the object in a mechanism that maximizes expected revenue for the seller?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consider allocating an object to one of two players when each player's preferences are her private information. Player 1's value for the object, denoted by v1 is drawn from a continuous distribution with [1;2] as its support. Player 2's value for the object, denoted by v2, is likewise drawn from the interval [0;1].
1. What is the equilibrium in dominant strategies if a second
2. For what pairs (v1;v2) should Player 1 and Player 2 respectively be allocated the object in a mechanism that maximizes expected revenue for the seller?
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