Suppose your utility over money (x) is given by u(x)=x(1-1), where r-2/3. You are one of two bidders in a first price sealed bid auction. The other bidder places a bid randomly drawn from a uniform distribution between 0 and 10. 1. What is your optimal bid in this case? 2. Compare that number with what your optimal bid would be if r were equal to 0. What is the explanation for this difference?

Suppose your utility over money (x) is given by u(x)=x(1-1), where r-2/3. You are one of two bidders in a first price sealed bid auction. The other bidder places a bid randomly drawn from a uniform distribution between 0 and 10. 1. What is your optimal bid in this case? 2. Compare that number with what your optimal bid would be if r were equal to 0. What is the explanation for this difference?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter18: Auctions

Section: Chapter Questions

Problem 10MC

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