Alice and Bob are at a strange auction. The item up for auction is $20. The rules
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Alice and Bob are at a strange auction. The item up for auction is $20.
The rules are that no one can bid twice in a row and that the highest bidder gets the $20. Also, and this is very strange, the highest bidder and the next highest bidder have to pay their bids. For example, if Bob bids $5, Alice bids $6, and Bob then passes, Alice gets the $20 and pays $6 to the auctioneer and Bob pays the auctioneer $5. Both have $100 to bid. What is the optimal strategy?
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Step by Step Answer:
The optimal strategy is for only one of them to enter the auction bid a dollar and get t...View the full answer
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Ankur Gupta
I have a degree in finance from a well-renowned university and I have been working in the financial industry for over 10 years now. I have a lot of experience in financial management, and I have been teaching financial management courses at the university level for the past 5 years. I am extremely passionate about helping students learn and understand financial management, and I firmly believe that I have the necessary skills and knowledge to effectively tutor students in this subject.
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