Say that you are bidding in a sealed bid auction and that you really want the it

Question

Say that you are bidding in a sealed bid auction and that you really want the item being auction. Winning it would be worth $250 to you. Say you expect the next-highest bidder to bid $100. In a standard "highest-bid" auction, what bid would a rational person make? The rational choice is to bid over $250 to guarantee that you win the item. The rational choice is to bid just under $250 so that you have a higher chance of winning the auction and would still have a net benefit. The rational choice is to bid %250 since that is what the item is worth to you. The rational choice is to bid a little bit more than $100 because that is the expected next-highest bid. In a Victory auction, what bid would the make? The rational choice is to bid slightly more than $ 100. The rational choice is to bid slightly more than $250. The rational choice is to bid $250. The rational choice is to bid slightly less than $250.

Explanation / Answer

Part A: option D

The last bid was for 100 so the next expected bid would be a little higher than 100 dollars. We can even bid 250 dollars but it would reduce our net income. Therefore, to get the highest net income we should bid the minimum with the possibility of getting the bid sanctioned in the auction. The last bid was for 100 dollars so now we can bid a little higher.

Part B: Option C

In a Vickrey auction, the bidder does not know about the bids made by other bidders. Therefore, we should bid the price equivalent to the value of asset so they we don’t lose the bid and also do not lose any money in bidding ( no profit, no loss).

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---