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5. Consider an auction environment with two bidders. Bidder 1's valuation, 1:1, is privately known to bidder 1 and distributed uniformly on on the interval
5. Consider an auction environment with two bidders. Bidder 1's valuation, 1:1, is privately known to bidder 1 and distributed uniformly on on the interval [0, 1]. Bidder 2's valuation, U2, is xed and commonly known. Focus on equilibria in which both bidders do not use dominated strategies. The auctioneer sets a reserve price r. In order to participate in the auction a bidder must bid at least the reserve price. The winning bidder pays the maximum of the losing bid and the reserve price. (a) If 02 = 1/3, what is a reserve price that maximizes the auctioneer's revenue? (b) If 112 = 2/3, what is a reserve price that maximizes the auctioneer's revenue
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