Question 1 Consider a first-price sealed bid auction of a single object with two bidders j = 1,2 and no reservation price. Bidder 1′s valuation is v1 = 2, and bidder 2′s valuation is v1 = 5. Both v1 and v2 are known to both bidders. Bids must be in whole dollar amounts. In the event of a tie, the object is awarded by a flip of a fair coin. (a) Find an equilibrium of this game. (b) Is the allocation of your answer to (a) efficient?

Question 1 Consider a first-price sealed bid auction of a single object with two bidders j = 1,2 and no reservation price. Bidder 1′s valuation is v1 = 2, and bidder 2′s valuation is v1 = 5. Both v1 and v2 are known to both bidders. Bids must be in whole dollar amounts. In the event of a tie, the object is awarded by a flip of a fair coin. (a) Find an equilibrium of this game. (b) Is the allocation of your answer to (a) efficient?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter18: Auctions

Section: Chapter Questions

Problem 9MC

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