In this problem we examine a second-price, sealed-bid auction. Assume that there are two bidders…

In this problem we examine a second-price, sealed-bid auction. Assume that there are two bidders who have independent, private values vi , which are either 1 or 7. For each bidder, the probabilities of vi = 1 and vi = 7 are each 1 2 . So there are four possible pairs of the bidders’ values (v1, v2): (1, 1), (1, 7), (7, 1), and (7, 7). Each pair of values has probability In this problem we examine a second-price, sealed-bid auction. Assume that there are two bidders who....

Assume that if there is a tie at a bid of x for the highest bid the winner is selected at random from among the highest bidders and the price is x.

(a) For each pair of values, what bid will each bidder submit, what price will the winning bidder pay, and how much profit (the difference between the winning bidder’s value and price he pays) will the winning bidder earn?

(b) Now let’s examine how much revenue the seller can expect to earn and how much profit the bidders can expect to make in the second-price auction. Both revenue and profit depend on the values, so let’s calculate the average of each of these numbers across all four of the possible pairs of values. (Note that in doing this we are computing each bidder’s expected profit before the bidder knows his value for the object.) What is the seller’s expected revenue in the second-price auction? What is the expected profit for each bidder?

(c) The seller now decides to charge an entry fee of 1. Any bidder who wants to participate in the auction must pay this fee to the seller before bidding begins and, in fact, this fee is imposed before each bidder knows his or her own value for the object. The bidders know only the distribution of values and that anyone who pays the fee will be allowed to participate in a second-price auction for the object. This adds a new first stage to the game in which bidders decide simultaneously whether to pay the fee and enter the auction, or to not pay the fee and stay out of the auction. This first stage is then followed by a second stage in which anyone who pays the fee participates in the auction. We assume that after the first stage is over, both potential bidders learn their own value for the object (but not the other potential bidder’s value for the object) and that they both learn whether or not the other potential bidder decided to enter the auction.

Let’s assume that any potential bidder who does not participate in the auction has a profit of 0; if no one chooses to participate, then the seller keeps the object and does not run an auction; if only one bidder chooses to participate in the auction then the seller runs a second-price auction with only this one bidder (and treats the second highest bid as 0); and finally, if both bidders participate, the second-price auction is the one you solved in part (a).

Is there an equilibrium in which each bidder pays the fee and participates in the auction? Give an explanation for your answer.

Calculate the price
Make an order in advance and get the best price
Pages (550 words)
$0.00
*Price with a welcome 15% discount applied.
Pro tip: If you want to save more money and pay the lowest price, you need to set a more extended deadline.
We know how difficult it is to be a student these days. That's why our prices are one of the most affordable on the market, and there are no hidden fees.

Instead, we offer bonuses, discounts, and free services to make your experience outstanding.
How it works
Receive a 100% original paper that will pass Turnitin from a top essay writing service
step 1
Upload your instructions
Fill out the order form and provide paper details. You can even attach screenshots or add additional instructions later. If something is not clear or missing, the writer will contact you for clarification.
Pro service tips
How to get the most out of your experience with Online Academic Experts
One writer throughout the entire course
If you like the writer, you can hire them again. Just copy & paste their ID on the order form ("Preferred Writer's ID" field). This way, your vocabulary will be uniform, and the writer will be aware of your needs.
The same paper from different writers
You can order essay or any other work from two different writers to choose the best one or give another version to a friend. This can be done through the add-on "Same paper from another writer."
Copy of sources used by the writer
Our college essay writers work with ScienceDirect and other databases. They can send you articles or materials used in PDF or through screenshots. Just tick the "Copy of sources" field on the order form.
Testimonials
See why 20k+ students have chosen us as their sole writing assistance provider
Check out the latest reviews and opinions submitted by real customers worldwide and make an informed decision.
Business and administrative studies
awesome job
Customer 453201, June 24th, 2022
Other
Thank you , Excellent work
Customer 453201, June 2nd, 2022
Psychology
Came in as promissed. Good paper.
Customer 453027, January 6th, 2022
Professions and Applied Sciences
Thanks. This helps a lot. Was a bit late but some cushion was given.
Customer 453015, February 10th, 2022
Classic English Literature
It was my first time using such a service. Essay was good and nicely formatted.
Customer 452441, February 16th, 2022
Health Care
The writer did not follow my choice of topic (Food/Water Insecurity, Hunger, & Poverty), the paper was instead written about Climate Change in Africa. However, the paper was still great and informative. Thank you!
Customer 452777, January 28th, 2022
Business Studies
Paper is great. Just only needed the one reference. Thank you
Customer 453139, May 4th, 2022
Psychology
quick, fast and exact!
Customer 453027, May 24th, 2022
Business Studies
Thank you so much! I had to take my dog to the ER and had no time for the assignment. I really appreciate your help! I can't thank you enough! I really appreciate the work and integrity put into it. Thank you for taking it seriously and not bullshiting the paper.
Customer 452815, July 26th, 2021
Psychology
thank you!
Customer 452947, October 21st, 2021
IT, Web
Awesome paper in such a short amount of time. Was in a jam with another service who didn't deliver, but Theresa did the job correctly. I will use her again to do my essays for sure!
Customer 452967, November 27th, 2021
English 101
great summery in terms of the time given. it lacks a bit of clarity but otherwise perfect.
Customer 452747, June 9th, 2021
11,595
Customer reviews in total
96%
Current satisfaction rate
3 pages
Average paper length
37%
Customers referred by a friend
OUR GIFT TO YOU
15% OFF your first order
Use a coupon FIRST15 and enjoy expert help with any task at the most affordable price.
Claim my 15% OFF Order in Chat
AllEscortAllEscort
Live ChatWhatsApp
AllEscort