2) Assume there are two bidders who are competing at a private-value auction, decided by a...

 

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2) Assume there are two bidders who are competing at a private-value auction, decided by a sealed bid, first price mechanism. Let v, and b, denote your valuation and bid and let vj and by denote the valuation and bid of the other bidder. If you outbid your opponent (b> b)), your payoff is (vi bi), otherwise zero. While your opponent's valuation is private information and unknown, you know that it is uniformly distributed between 0 and 1, thus F(v)=P(v<v) = v. You also believe that the other bidder bids according to the function b(v)= v. Assuming your valuation is v/= 3/5, what is your optimal bid? How will your optimal bid change with additional competitors in the auction? Justify your rationale. 2) Assume there are two bidders who are competing at a private-value auction, decided by a sealed bid, first price mechanism. Let v, and b, denote your valuation and bid and let vj and by denote the valuation and bid of the other bidder. If you outbid your opponent (b> b)), your payoff is (vi bi), otherwise zero. While your opponent's valuation is private information and unknown, you know that it is uniformly distributed between 0 and 1, thus F(v)=P(v<v) = v. You also believe that the other bidder bids according to the function b(v)= v. Assuming your valuation is v/= 3/5, what is your optimal bid? How will your optimal bid change with additional competitors in the auction? Justify your rationale.

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Ansal You One other Optimal bid Yr valu v35 ... View the full answer