Private information and auctions
1.[2p] What does Harsanyi's construction do to a game of incomplete information?
What does Harsanyi's construction do to a game of incomplete information?
The answer is: It replaces the unknown payoffs with a private type drawn by nature from a commonly known distribution
The answer is: It replaces the unknown payoffs with a private type drawn by nature from a commonly known distribution
The answer is: It replaces the unknown payoffs with a private type drawn by nature from a commonly known distribution
2.[3p] Why does bidding your true value weakly dominate in a second-price auction?
Why does bidding your true value weakly dominate in a second-price auction?
The answer is: Deviating changes the outcome only when the highest rival bid falls between your bid and your value, and that change is always for the worse
The answer is: Deviating changes the outcome only when the highest rival bid falls between your bid and your value, and that change is always for the worse
The answer is: Deviating changes the outcome only when the highest rival bid falls between your bid and your value, and that change is always for the worse
3.[3p] Values are uniform on the interval from 0 to 1 and there are five bidders in a first-price sealed-bid auction. What should a bidder with value 0.9 bid?
Values are uniform on the interval from 0 to 1 and there are five bidders in a first-price sealed-bid auction. What should a bidder with value 0.9 bid?
4.[3p] With four bidders in that same setting, what is the expected revenue from a second-price sealed-bid auction?
With four bidders in that same setting, what is the expected revenue from a second-price sealed-bid auction?
5.[2p] Under independent private values and risk neutrality, first-price and second-price sealed-bid auctions raise the same expected revenue.
Under independent private values and risk neutrality, first-price and second-price sealed-bid auctions raise the same expected revenue.
The answer is: True
6.[3p] Which of these break revenue equivalence between formats?
Which of these break revenue equivalence between formats?
Select all that apply
The answer is: Risk-averse bidders, Values that are correlated across bidders, A bidding ring that can suppress competition, Differences in how many bidders each format attracts
7.[3p] Ten bidders each receive a signal drawn uniformly within 10 of a tract's common value. By how much does the highest of those signals exceed the true value on average?
Ten bidders each receive a signal drawn uniformly within 10 of a tract's common value. By how much does the highest of those signals exceed the true value on average?
8.[3p] What is the correct way to avoid the winner's curse?
What is the correct way to avoid the winner's curse?
The answer is: Estimate the value conditional on your signal and on your signal being the highest
The answer is: Estimate the value conditional on your signal and on your signal being the highest
The answer is: Estimate the value conditional on your signal and on your signal being the highest
9.[2p] Match each auction format to its defining rule.
Match each auction format to its defining rule.
English
Dutch
First-price sealed bid
Second-price sealed bid
price rises until one bidder is left
highest bid wins and pays its bid
price falls until someone claims the object
highest bid wins and pays the runner-up
Show the answer
English: price rises until one bidder is left Dutch: price falls until someone claims the object First-price sealed bid: highest bid wins and pays its bid Second-price sealed bid: highest bid wins and pays the runner-up