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Consider a 2-person common value auction. Suppose the value of the item being auctioned is v; but v is unknown to all bidders. Each bidder
Consider a 2-person common value auction. Suppose the value of the item being auctioned is v; but v is unknown to all bidders. Each bidder i receives a signal, Si, about the value, which is given Si = 1 + ; Assume E1 and 2 are independently and uniformly distributed over (-2,2). a) What is expected signal value? b) What is each bidder's individual expectation of v after receiving signal si? c) The difference between the expected highest signal value and the value of the object can be considered as a measure of potential winner's curve. Find the difference. Consider a 2-person common value auction. Suppose the value of the item being auctioned is v; but v is unknown to all bidders. Each bidder i receives a signal, Si, about the value, which is given Si = 1 + ; Assume E1 and 2 are independently and uniformly distributed over (-2,2). a) What is expected signal value? b) What is each bidder's individual expectation of v after receiving signal si? c) The difference between the expected highest signal value and the value of the object can be considered as a measure of potential winner's curve. Find the difference
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