Question
Exercise 1: Two buyers, J1 and J2 take part in a first-price sealed-bid auction. The bidders can only bid 100 or 200 . Each of
Exercise 1: Two buyers, J1 and J2 take part in a first-price sealed-bid auction.
The bidders can only bid 100 or 200 . Each of them knows his/her own valuation and moreover:
J1 believes that J2's value is 200 .
J2 believes that J1's value is 0 with probability or 300 with probability .
You are asked to:
a) Represent the decision tree of the game.
b) Determine the strategy set of each buyer.
c) Find Bayesian Nash equilibria.
Exercise 2: In the auction of the previous exercise, assume now that each bidder
knows his own value and moreover:
J1 believes that J2 has a value of 100 with probability and of 200 with
probability .
J2 believes that J1 has a value of 0 with probability and of 300 with
probability .
You are asked to:
a) Represent the decision tree.
b) Determine the strategy set of each buyer.
c) Find Bayesian Nash equilibria.
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