Question

Consider an auction where n identical objects are offered and there are n+ 1 bidders. The true value of each object is the same for all bidders and for all objects but each bidder gets only an independent unbiased estimate of this common value. Bidders submit sealed bids and the top n bidders get one object each and each pays her own bid. Suppose you lose. What conclusion might you draw from losing? How will this affect your bidding strategy? Relate your answer to the winner's curse we discussed in class

Answer 1

If the person loses in this sealed bid strategy he definitely must be lowest bidder among the set of lets 10 bidders with 9 objects where 9 bidders who bid higher than this lerson gets the 9 objects allocated based in their placed bids.

In such case the lesson learnt here is to maximise the bid so high on least preferred object where demand would be lwss to atleast bag one object. Here since it is sealed bid auction the highest silent bidder gets the object.

Here we must understand concepts like Nash equilibria where you can be better off if you know market demand and factors and place higher payoff bid to subsequently win.

Other big strategies of winning sealed bid auctionsare

1. Placing odd bids which others usually dont bid
2. Acting quickly
3. Negotiating with other players
4. Horse trading.