Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Question
Chapter 20, Problem 13QE
To determine
Reason for the sellers who generally prefer a Vickrey auction to a regular sealed bid.
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“While auctions are appealing in theory, the challenges of auction design in practice are insurmountable” discuss
In a sealed-bid, second-price auction with complete information, the winner is the bidder who submits the second-highest price, but pays the price submitted by the highest bidder. Do you agree? Explain.
Consider the following situation: five individuals are participating in an auction for an old bicycle used by a famous cyclist. The table below provides the bidders' valuations of the cycle. The auctioneer starts the bid at an offer price far above the bidders' values and lowers the price in increments until one of the bidders accepts the offer.
Bidder
Value ($)
Roberto
750
Claudia
700
Mario
650
Bradley
600
Michelle
550
What is the optimal strategy of each player in this case?
Who will win the auction if each bidder places his or her optimal bid?
If Claudia wins the auction, how much surplus will she earn?
Chapter 20 Solutions
Microeconomics
Ch. 20.1 - Prob. 1QCh. 20.1 - Prob. 2QCh. 20.1 - Prob. 3QCh. 20.1 - Prob. 4QCh. 20.1 - Prob. 5QCh. 20.1 - Prob. 6QCh. 20.1 - Prob. 7QCh. 20.1 - Prob. 8QCh. 20.1 - Prob. 9QCh. 20.1 - Prob. 10Q
Ch. 20.A - Netflix and Hulu each expects profit to rise by...Ch. 20.A - Prob. 2QECh. 20 - Prob. 1QECh. 20 - Prob. 2QECh. 20 - Prob. 3QECh. 20 - Prob. 4QECh. 20 - Prob. 5QECh. 20 - Prob. 6QECh. 20 - Prob. 7QECh. 20 - Prob. 8QECh. 20 - Prob. 9QECh. 20 - Prob. 10QECh. 20 - Prob. 11QECh. 20 - Prob. 12QECh. 20 - Prob. 13QECh. 20 - Prob. 14QECh. 20 - Prob. 15QECh. 20 - Prob. 16QECh. 20 - Prob. 1QAPCh. 20 - Prob. 2QAPCh. 20 - Prob. 3QAPCh. 20 - Prob. 4QAPCh. 20 - Prob. 5QAPCh. 20 - Prob. 6QAPCh. 20 - Prob. 1IPCh. 20 - Prob. 2IPCh. 20 - Prob. 3IPCh. 20 - Prob. 4IPCh. 20 - Prob. 5IPCh. 20 - Prob. 6IPCh. 20 - Prob. 7IP
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Similar questions
- why is a nash equilibrium stablearrow_forwardDiscrete All-Pay Auction: In Section 6.1.4 we introduced a version of an all- pay auction that worked as follows: Each bidder submits a bid. The highest bidder gets the good, but all bidders pay their bids. Consider an auction in which player 1 values the item at 3 while player 2 values the item at 5. Each player can bid either 0, 1, or 2. If player i bids more than player j then i wins the good and both pay. If both players bid the same amount then a coin is tossed to determine who gets the good, but again both pay. a. Write down the game in matrix form. Which strategies survive IESDS? b. Find the Nash equilibria for this game.arrow_forwardIn 3 short paragraphs describe what advances in auction processes captured the Nobel Prize in econmics in 2020.arrow_forward
- How to solve this question? Consider an antique auction where bidders have independent private values. There are two bidders, each of whom perceives that valuations are uniformly distributed between $100 and $1,000. One of the bidders is Sue, who knows her own valuation is $200. What is Sue's optimal bidding strategy in a Dutch auction?arrow_forwardFind all Nash equilibria for the two-player game (image attached). Provide necessary computation.arrow_forwardWhy do sellers generally prefer a Vickrey auction to a regular sealed bid if sellers don’t receive the highest bid in the Vickrey auction? Sellers only have to sell their item if the bid is the highest-price bid. The second-highest bid in a Vickrey auction is generally higher than the highest bid in a regular sealed-bid auction. The second-highest bid is about the same in both auctions. Sellers prefer the final price is not revealed to all bidders. Sellers would never prefer Vickrey auctions.arrow_forward
- This question is from game theoryarrow_forwardWrite the game below in normal form and find all Nash equilibria. C 2. Write the game below in normal form and find all Nash equilibria. जल P = 1/1535 Nature ताल P = 1/3 P1 A (3,6) P1 B P2 B C2 P2 Pz Pz (0,3) ✓ (9,0) (3,3) ✓ (0, 6) (-3,3) ✓ (9,6) Х (3,0) (-3, 12)arrow_forwardEvolutionary game theory provides a framework for understanding the emergence of preferences and behavior. Why are theoretical methodologies that employ the rational actor model an evolutionary stable strategy for economists?arrow_forward
- PJ has been owning a City Golf, model 2004 for the past 15 years and now plans to sell it. Town auctioneers has offered to sell his car at their next auction. This is the first time PJ is hearing at an auction. PJ has approached you to explain to him what auction means and asked you if he should sell his car on auction or not. Briefly explain to PJarrow_forwardConsider the following scenarios in the Ultimatum game, viewed from the perspective of the Recipient. Assume that the Recipient is motivated by negative reciprocity and will gain $15 of value from rejecting an offer that is strictly less than 50 percent of the total amount to be divided between the two players by the Proposer. Assume that the Proposer can only make offers in increments of $1. If the pot is $30, what is the minimum offer that the Responder will accept? What percent of the pie is this amount? The minimum offer that will be accepted is S. which represents percent of the pie. If the pot is $100, what is the minimum offer that the Responder will accept? What percent of the pie is this amount? The minimum offer that will be accepted is S, which represents percent of the pie. (Round answers to 2 decimal places as needed)arrow_forwardparameter x =5 List all pure strategy Nash equilibria.arrow_forward
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