Suppose that a seller has an item to sell and there is one person who might buy it. The item has value V to the seller, and V is equally likely to be any value between 0 and $100. If the buyer can purchase it, she can increase its value so that the value of the item to the buyer if she makes the purchase is 1.2*V. The seller makes an offer p to buy the item. The seller than chooses whether to sell the item or not.

What is the best amount for the buyer to offer

Question 1 options:

	$120
	$100
	$60
	$0

Question 2 (1 point)

Refer to question #1: Who is more likely to lose money in the game?

Question 2 options:

	the buyer
	the seller
	both are equally likely to lose money
	no player loses money in this game

Question 3 (1 point)

In a common value auction

Question 3 options:

	The item has a different value to each individual
	Players know how much they value the item at the time of bidding
	The item has the same value to each individual
	All bidders have the same signal about what the item is worth

Question 4 (1 point)

Suppose that you and another bidder are bidding for an item. Each of you has a signal about what the item is worth. Each of you knows that signals are equally likely to take any value between 0 and $10. Each of you knows your own signal but not the signal of the other bidder. The true value of the item is the average of the two signals.

Your signal says that the item is worth $8. How much would you bid in equilibrium?

Question 4 options:

	$8
	$4
	$2
	$0

Question 5 (1 point)

Refer back to question #4. Suppose that your signal is $8 and the signal of your competitor is $5. What is your payoff in equilibrium?

Question 5 options:

	$8
	$4
	$2.5
	$0

Question 6 (1 point)

Refer back to questions 4 and 5. What is the other bidder's payoff in equilibrium?

Question 6 options:

	$8
	$4
	$3
	$0

Question 7 (1 point)

In common value auctions, the typical player bids

Question 7 options:

	higher than in equilibrium
	lower than in equilibrium
	close to the equilibrium level
	as low as possible

Question 8 (1 point)

The winner's curse is

Question 8 options:

	reduced as the number of bidders increases
	more severe as the number of the bidders increases
	is about as severe for different numbers of bidders
	does not exist