A currency dealer at the Pacific Mall auctions 100-dollar bills using a Second-Price, Sealed Bid (Vickery) mechanism.
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Question:
A currency dealer at the Pacific Mall auctions 100-dollar bills using a Second-Price, Sealed Bid (Vickery) mechanism. 40 percent of the bills are counterfeits, worth O. Genuine 100-dollar bills are worth $100. Samantha is a currency expert. Given that a bill is counterfeit, there is a 75 percent chance that Samantha will know it is a fake. But she isn't perfect. Given that a bill is genuine, there is a 50 percent chance that Samantha will identify it as a fake. What is your optimal bid given that Samantha identifies a bill as genuine?
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