Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Q2 Revenue equivalence I Consider a sealed-bid auction in which the seller draws one of the N bids at random. The buyer whose bid was
Q2 Revenue equivalence I
Consider a sealed-bid auction in which the seller draws one of the N bids at random. The buyer whose bid was drawn wins the auction and pays the amount bid. Assume that buyer valuations follow a uniform(0,1) distribution.
1. What is the symmetric equilibrium bidding strategy b(v)? Explain in words why you know this
2. What is the seller's expected revenue?
3. Why doesn't this auction pay the seller the same revenue as the four standard auctions? That is, why doesn't the revenue equivalence theorem apply here? Be specific.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started