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Q1 Auction for Two Items There are three riskneutral bidders. Consider a sealedbid auction for two identical objects. Each bidder has demand for only one
Q1 Auction for Two Items There are three riskneutral bidders. Consider a sealedbid auction for two identical objects. Each bidder has demand for only one 1mit of the two identical items and can win only one unit of the item. Bidder i's valuation, denoted 11,-, for one unit of the item is private information and all values are drawn independently from the uniform distribution on [[1, 100]. It is a sealedbid auction, where each bidder 3' simultaneously and independently submits a sealed bid b,- E [0, 100]. The two highest bidders each win one item, and they each pay the amount of the thirdhighest bid (third-price sealed-bid auction). For example, if in > 52 > b3, then bidders 1 and 2 each win one item and each pays .53, while bidder 3 pays zero (and wins nothing]. (a) Suppose that seller only selLs one item (so only one bidder can win and pay the third price). Is it a good idea for bidders to bid their values? Underbid? Overbid? (b) Now suppose that seller sells both items as described in the question. How should bidders bid in this auction
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