You are a bidder in an independent private values auction, and you value the object at $4,000. Each bidder perceives that valuations are uniformly distributed between $1,000 and $7,000. Determine your optimal bidding strategy in a first-price, sealed-bid auction when the total number of bidders (including you) is:
a. 2 bidders.
Bid: $ _______
b. 10 bidders.
Bid: $ _______
c. 100 bidders.
Bid: $_______
The formula to calculate the:
Bid = V - (V - L) / N
Where,
V = Bidder's own valuation
L = Lowest valuation
N = Number of bidders
a) When the total number of bidders (including you) is 2,
Bid = 4,000 - (4,000 - 1,000) / 2
= $2,500
b) When the total number of bidders (including you) is 10,
Bid = 4,000 - (4,000 - 1,000) / 10
= $3,700
c) When the total number of bidders (including you) is 100,
Bid = 4,000 - (4,000 - 1,000) / 100
= $3,970
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