Question: Consider a two-player second-price auction: each submits (simultaneously) a sealed bid, and whoever bids the most wins, but pays the loser's bid. Losers pay nothing.

Consider a two-player second-price auction: each submits (simultaneously) a sealed bid, and whoever bids the most wins, but pays the loser's bid. Losers pay nothing. The object is worth $10 to P1 and $5 to P2, and both know this. (a) Show that the best possible NE payoff to P1 is 10, and find an equilibrium where this is his payoff. (Note, this means he pays zero for the object). (b) Show that the worst possible NE payoff to P1 is 0, and find a NE where this is his payoff. (Note, this means that he pays 10 for the object)
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