Suppose that Alpha Inc., Richardson Industries, and K-Tek are the only three firms interested in a plot
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Suppose that Alpha Inc., Richardson Industries, and K-Tek are the only three firms interested in a plot of land on the outskirts of town. The lot is being auctioned by a second-price sealed-bid auction. Alpha values the lot at $1.3 million, Richardson at $1.05 million, and K-Tek at $950,000. Each bidding firm’s surplus is vi - p if it wins the auction and 0 if it loses. The values are private. What is each bidder’s optimal bid? Which firm wins the auction, and what price does that firm pay?
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Managerial Economics And Strategy
ISBN: 9780134899701
3rd Edition
Authors: Jeffrey M. Perloff, James A. Brander
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