Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Question
Chapter 15A, Problem 6E
To determine
To distinguish: Between the common-value and private-value auctions with examples and also between the descending-price (Dutch) auctions and ascending-price (English) auctions with examples.
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Students have asked these similar questions
Why do sellers generally prefer a Vickrey auction to a regular sealed bid if sellers don’t receive the highest bid in the Vickrey auction?
Sellers only have to sell their item if the bid is the highest-price bid.
The second-highest bid in a Vickrey auction is generally higher than the highest bid in a regular sealed-bid auction.
The second-highest bid is about the same in both auctions. Sellers prefer the final price is not revealed to all bidders.
Sellers would never prefer Vickrey auctions.
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.
Economics
Consider a first-price sealed-bid auction of a
single object with two bidders j = 1, 2. Bidder 1's
valuation is v1 = 2, and bidder 2' s valuation is v2 =
5. Both v1 and v2 are known to both bidders. Bids
must be in whole dollar amounts (e.g. $1). In the
event of a tie, the object is awarded by a flip of a
fair coin.
(a) Write down this auction as a 2 × 2 matrix game.
Hint: note that each bidder can choose a bid from
{0, 1, 2, 3, 4, 5, ..}. Your matrix will be incomplete
since you cannot write a matrix with infinite rows
and columns
(b) Eliminate the strictly dominated strategies.
Write down the resulting matrix game.
(c) An auction is efficient if the good is allocated
to the bidder with the highest valuation of the
good. What are the Nash equilibria of this game?
Åre the Nash equilibria efficient?
%3D
Chapter 15A Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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Similar questions
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