Question
An item is going up for auction.There are two bidders, and each can be one of two types, Rich and Poor.We know the following about
An item is going up for auction.There are two bidders, and each can be one of two types, Rich and Poor.We know the following about the bidders:
- A Rich bidders is willing to pay $120.
- A Poor bidders is willing to pay $100.
- Poor bidders make up 60% of the bidders.
If the item is sold using an Ascending Auction:
- Describe the dominant bidding strategy for each player.
- Assuming a Rich bidder is in the auction, what would be the probability of that Rich bidder winning the auction?
- What would be the expected payment of a Rich bidder?
- What would be the expected surplus of a Rich bidder?
- Assuming a Poor bidder is in the auction, what would be the probability of thatPoor bidder winning the auction?
- What would be the expected payment of a Poor bidder?
- What would be the expected surplus of a Poor bidder?
If the item is sold using aDescending Auction:
- Describe the dominant bidding strategy for each player.
- Assuming a Rich bidder is in the auction, what would be the probability ofthat Rich bidder winning the auction?
- What would be the expected payment of a Rich bidder?
- What would be the expected surplus of a Rich bidder?
- Assuming a Poor bidder is in the auction, what would be the probability of thatPoor bidder winning the auction?
- What would be the expected payment of a Poor bidder?
- What would be the expected surplus of a Poor bidder?
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Price theory and applications
Authors: Steven E landsburg
8th edition
538746459, 1133008321, 780538746458, 9781133008323, 978-0538746458
