Multiple Choice Questions
1. You are bidding in a second-price auction for a painting that you value at $800. You estimate that other bidders are most likely to value the painting at between $200 and $600. Which of these is likely to be your best bid?
a. $1,000
b. $800
c. $600
d. $400

2. Which of the following is true about different ways of conducting a private-value auction?
a. A first-price auction is strategically equivalent to a second-price auction.
b. A first-price auction is strategically equivalent to an English auction.
c. A second-price auction is strategically equivalent to an English auction.
d. None of the above

3. Suppose that five bidders with values of $500, $400, $300, $200, and $100 attend an oral auction. Which of these is closest to the winning price?
a. $500
b. $400
c. $300
d. $200

4. In the above auction, if the bidders with the first- and third-highest values ($500 and
$300) collude, which of these is closest to the winning price?
a. $500
b. $400
c. $300
d. $200

5. In a common-value auction, you should
a. bid more aggressively the more competitors you face.
b. bid less aggressively the more competitors you face.
c. bid the same regardless of the number of competitors.
d. bid more aggressively when others have better information than you.

6. If a seller is concerned about collusion among bidders, which of the following changes to the auction should the seller make?
a. Hold frequent, small auctions instead of infrequent large auctions.
b. Conceal the amount of winning bids.
c. Publically announce the name of each auction's winner.
d. Hold a second-price instead of a first price auction.

7. You're holding an auction to license a new technology that your company has developed. One of your assistants raises a concern that bidders' fear of the winner's curse may encourage them to shade their bids. How might you address this concern?
a. Release your analyst's positive scenario for the technology's future profitability.
b. Release your analyst's negative scenario for the technology's future profitability.
c. Use an oral auction.
d. All of the above

8. Which of the following is true about the winner's curse?
a. The winner's curse occurs primarily in private-value auctions.
b. You successfully avoided the winner's curse if you made money in the auction.
c. The winner's curse means that you bid incorrectly.
d. The winner's curse means that you lost money in an auction.

9. A bidder's value for a good may be low ($2), medium ($5), or high ($7). There is an equal number of potential bidders having each value. Suppose two bidders participate in a second-price auction. What is the best estimate of the expected revenue from the auction?
a. $4.11
b. $3.99
c. $3.56
d. $5.00

10. In a first-price auction, you bid your value, and in a second-price auction you bid your value.
a. At; above
b. Below; above
c. Below; at
d. Below; below