2. Suppose there are two risk-neutral bidders participating in a sealed bid first-price auction for an...
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2. Suppose there are two risk-neutral bidders participating in a sealed bid first-price auction for an object of common value v. This means both players have the same value for the object. Player 1 knows the value of v; Player 2 knows only that is uniformly distributed on [0,1]. (The probability distribution is commonly known.) Show that Player 2 will never use a pure strategy in equilibrium. Calculate the equilibrium in which Player 1 uses a pure strategy (define what a strategy is for Player 1 first) and Player 2 uses a mixed strategy. 2. Suppose there are two risk-neutral bidders participating in a sealed bid first-price auction for an object of common value v. This means both players have the same value for the object. Player 1 knows the value of v; Player 2 knows only that is uniformly distributed on [0,1]. (The probability distribution is commonly known.) Show that Player 2 will never use a pure strategy in equilibrium. Calculate the equilibrium in which Player 1 uses a pure strategy (define what a strategy is for Player 1 first) and Player 2 uses a mixed strategy.
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A strategy is a rule that the player follows for biddi... View the full answer
Related Book For
Microeconomics
ISBN: 978-0321866349
14th canadian Edition
Authors: Christopher T.S. Ragan ,Richard G Lipsey
Posted Date:
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