Question: Tess and Meg are the only two bidders in an auction for a van Gogh painting. Each can be one of two types with equal

Tess and Meg are the only two bidders in an auction for a van Gogh painting. Each can be one of two types with equal probability: a low-value consumer with valuation $1 million or a high-value consumer with valuation $2 million. Each knows her own type but only knows the probabilities of the other's type.
a. Suppose they compete in a sealed-bid, second price auction. What are the equilibrium bidding strategies? Compute the seller's expected revenue.
b. Repeat part a supposing there are three identical bidders. What if there are N bidders?
c. Explain how your answer from parts a and b can be used to compute the seller has expected revenue from a first-price, sealed-bid auction.

Step by Step Solution

★★★★★

3.41 Rating (167 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a The equilibrium is for each to bid her valuation The price paid will be 1 million unless both have ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

228-B-E-M-E (1168).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!

Disney Enterprises issued 7.55% senior debentures (bonds) on July 15, 1993, with a 100-year maturity (i.e., due on July 15, 2093). Suppose an investor purchases one of these bonds on July 15, 2003...

Suppose that Jerry and Teddy are the only two sellers of designer umbrellas, which consumers view as differentiated products. For simplicity, assume each seller has a constant marginal cost equal to...

Suppose that Jill and Joe are the only two people in the small town of Andover. Andover has land available to build a park of no more than 9 acres. Jill and Joe's demand schedules for the park are as...

Suppose that Coke and Pepsi are the only two producers of cola drinks, making them duopolists. Both companies have zero marginal cost and a fixed cost of $100,000. a. Assume first that consumers...

Ex 11-2... question is attached... Exercise 11-22 Break-even sales and sales mix for a service company Yellow Dove Airways provides air transportation services between Portland and Minneapolis. A...

Due Sunday, 11/20: Problems from Zimmerman text: 2-11, 2-44, Case 2-3, 7-7, and 7-20 Chapter Two The Nature of Costs Chapter Outline A. Opportunity Costs 1. Characteristics of Opportunity Costs 2....

Answers are neeeded Consider an economy with two dates, denoted by t = 1, 2. There are two goods: consumption and capital. There is a continuum of entrepreneurs and a continuum of consumers. All...

Tess is a full time employee with Sol Star Inc. ("SSI") in a research and development role (assume she is an employee). Tess earns an annual salary of $100,000 Annual payroll deductions for 2019...

CourseSmart - Instructors - Print 1 of 10 http://instructors.coursesmart.com/print?xmlid=9780132146074/594&pa... User name: tess bader Book: Managing Information Technology, Seventh Edition Page:...

THE GOAL This policy says that the Board of Directors of Temporary Emergency Services ("Board") needs to keep written records of policies, procedures, and practices ("Manual"). The manual explains...

ln 1986, Tess made a will in which she devised her assets as follows: 1. ltem 1: 1 give and bequeath to my son, "Son", in fee simple absolute, my real property known asGreenacre which is located at...

The PDC Company was described earlier in this chapter. Refer to the PDC Companys projected monthly operating schedules in Table. PDCs sales are projected to be $80,000 in September 2011. A. Prepare...

The following data were obtained from recent annual reports of Chevron, a multinational oil company (all data in $millions): Interest expense... Pretax income ......................... Net income....

nsider the following rational function. f ( x ) = x 2 + 6 x 3 6 4 Step 1 of 2 : Find equations for the vertical asymptotes, if any, for the function.

In 2010, Hershey, the U.S. chocolate maker, announced plans to boost its presence in Europe. The companys best known brand is Hersheys Kisses, but other brands include Hugs and Reeses Pieces. The...

Survey the Federal Reserve Board explanations, charts, and aggregate data to form an opinion as to how important commercial paper is to the U.S. economy. Compose a paragraph summarizing your findings...

You have 10 m of 0.50-mm-diameter copper wire and a battery capable of passing 15 A through the wire. What magnetic field strengths could you obtain (a) inside a 2.0-cm-diameter solenoid wound with...

Use Definition 7.1.1 to find {f (t)}. Definition 7.1.1 Let f be a function defined for t = 0. Then the integral is said to be the Laplace transform of f, provided that the integral converges. (2, 2)...

Through court action, relatives now seek to stop Neerow from using his money and goods so wastefully. Should they be allowed to do so?

How can you provide more unique opportunities for professional development?

Which of the following are direct foreign investments? a. A Saudi businessman buys $10 million of IBM stock. b. The same businessman buys a New York apartment building. c. A French company merges...

For each of the following, specify whether the foreign direct investment is horizontal or vertical; in addition, describe whether that investment represents an FDI inflow or outflow from the...

If there are internal economies of scale, why would it ever make sense for a firm to produce the same good in more than one production facility?

1. Indicate whether the identifiers below are valid or invalid by putting a () for valid and (x) for invalid. Res num Irvigh 2. Fill in the blanks in each of the following. a) Every C program begins...

Hi please use the given information to answer each part of the problem and please include any drawing, or steps/formulas to improve my understanding of the problem if necessary. Thank you! Please do...

Time left 2:29:38 Porter's Corner has sales of $4,650 net income of $490, total assets of $5,820, and total debt of $2,760. Assets and costs are proportional to sales. Debt and equity are not. No...