Question

Suppose the Business School is auctioning off season tickets to the donor's box for KU Football games. Suppose there are a number bidders who have some valuation for these tickets. The table below depicts the valuation for each bidder.

Bidder	Valuation
A	8000
B	6000
C	7000
D	5000
E	7000

What would we expect the winner to pay in an Second-Price auction for these tickets?

Answer 1

It is important to understand the "Second-Price Auction" to sold this problem. In this auction, if a bid wins, the winner has to pay $0.01 above the second highest bid in the auction. Therefore, in this type of auction, it makes sense to bid the highest with knowledge of the fact that the individual will end up paying less.

In the given auction -

Second Highest Bid = 7000

Therefore,

Amount the Winner has to Pay = 7000 + 0.01

Amount the Winner has to Pay = 7000.01