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1. Suppose that firms must own pollution permits in order to pollute. Suppose that a single permit is being auctioned to two firms. Firm 1

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1. Suppose that firms must own pollution permits in order to pollute. Suppose that a single permit is being auctioned to two firms. Firm 1 values the permit at $200 and Firm 2 values it at E150. What do you expect the outcome of the auction to be in the case of: (a) An English auction? (b) A Dutch auction? (c) A First-price sealed-bid auction? (d) A Second-price sealed-bid auction? Carefully explain your answers

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