Question
Question 2 Two bidders are bidding on an item which is auctioned via a first price sealed bid auction. Each bidder's valuation can take one
Question 2 Two bidders are bidding on an item which is auctioned via a first price sealed bid auction. Each bidder's valuation can take one of the three values with the corresponding probabilities: 3 with probability 0.2, 7 with probability 0.4, 9 with probability 0.4. First Nature moves and chooses each bidder's valuation. Then each bidder observes her own valuation, but she doesn't observe the other bidder's valuation. Then bidders simultaneously choose their bids, which have to be a positive integer. A bidder's payoff is 0 if she doesn't win the item. A bidder's payoff is her valuation minus her bid if she wins the item. In case of a tie, a fair coin flip decides the outcome of the auction. a) (10 points) Does the following strategy profile form a symmetric Bayesian Nash equilibrium: Bidder bids 3 if her valuation is 3, bids 7 if her valuation is 7, bids 9 if her valuation is 9. Explain why/why not this is the case. b) (15 points) Does the following strategy profile form a symmetric Bayesian Nash equilibrium: Bidder bids 2 if her valuation is 3, bids 5 if her valuation is 7, bids 6 if her valuation is 9. Explain why/why not this is the case.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started