Y5

A and B would both like to own the same hand-written and signed manuscript of an Ezra Pound poem. The manuscript is worth $5 million to A and worth $3 million to B. The present owner of the manuscript proposes the following method of sale. A and B will each simultaneously write down a `bid' for the manuscript. Let bA be A's bid and let bB be B's bid. The manuscript will go to the person whose bid is highest, and that person will have to pay the other person's bid. If the bids are tied, then a fair coin will be tossed to decide who gets the manuscript, and that person will have to pay the tied bid. In either case, the person who does not get the manuscript pays nothing.

Everything above is common knowledge to the players. There are no other bidders. Negative bids are not allowed.

A. This is a (choose one)

i. first-price sealed bid auction.

ii. second-price sealed bid auction.

iii. winner-takes-all auction.

iv. third-price sealed bid auction.

B. () is an equilibrium.

i. True

ii. False

C. "() is an equilibrium.

i. True

ii. False

D. "() is an equilibrium.

i. True

ii. False

E.is a weakly dominated strategy for B.

i. True

ii. False

F. A's best responses to are

i. =2

ii.<2

iii. >2

iv. other