Question

John is selling a piece of artwork he has produced. He knows that there is no investment value in his art, and he also knows that there are four individuals interested in his art. He knows their valuation of his picture will be $0, $25, $50, and $75.

Show work and explanation to answer the following:

a) profit for sealed bid auction

b) profit for English auction

c) profit for second price auction

Answer 1

1. profit for sealed bid auction

In Sealed Bid Auction all bidders submit bids at the same time and the bid of one participant will not appear to the other participant.and The highest Bidder will get the item at submitted price

Thus Profit from Sealed Bid Auction = Highest Bid = $75

2. profit for English auction

In English Auction, bidding starts at a auctioning bid which was set by auctioneer and the participants has to quote bid above auctioned bid and the bid price goes up until no other bids were received.

Thus Profit from English Auction = Highest Bid = $75

3. profit for second price auction

Second-Price Auction is an auction where the bidder whose quoted the highest price has to pay an amount equal to the second highest bid value + $0.01.

Thus Profit from Second Price Auction = Second highest bid + $0.01 = $50 + 0.01 = $50.01

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