Bob and David are both purchasing the same identical item from 2 different auctions. Auction 1 is a traditional sealed bid first price auction. Auction 2 is a Modern Dutch Auction. Modern Dutch Auctions work in a very similar manner to traditional Dutch Auctions: The price starts out artificially high, at a point where demand is believed to be zero. At regular intervals, the price is lowered, and continues to tick down in regular increments until a buyer is lured into making a bid. The auction stops when the first bid is placed. The winning bidder gets his goods at the price listed when he stopped the clock. Bob is a fully nave hyperbolic discounter with a = 0.5, 8 = 1 & = 1. David is a regular buyer with no discount factors. Assume that both Bob and David have the same value for the item being sold and that the time intervals for the Dutch auction are a 10% decrease in price each day. For Auction 1 and 2 what would the bidding price be for each bidder? I know that for Auction 1 the optimal strategy for Sealed Bid First Price Auctions the best strategy is to bid your value so both people would bid their true value. I am confused about how the hyperbolic discounting would impact both Auction types. Bob and David are both purchasing the same identical item from 2 different auctions. Auction 1 is a traditional sealed bid first price auction. Auction 2 is a Modern Dutch Auction. Modern Dutch Auctions work in a very similar manner to traditional Dutch Auctions: The price starts out artificially high, at a point where demand is believed to be zero. At regular intervals, the price is lowered, and continues to tick down in regular increments until a buyer is lured into making a bid. The auction stops when the first bid is placed. The winning bidder gets his goods at the price listed when he stopped the clock. Bob is a fully nave hyperbolic discounter with a = 0.5, 8 = 1 & = 1. David is a regular buyer with no discount factors. Assume that both Bob and David have the same value for the item being sold and that the time intervals for the Dutch auction are a 10% decrease in price each day. For Auction 1 and 2 what would the bidding price be for each bidder? I know that for Auction 1 the optimal strategy for Sealed Bid First Price Auctions the best strategy is to bid your value so both people would bid their true value. I am confused about how the hyperbolic discounting would impact both Auction types