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Questions › DSE › DSE 2017 › Q8
2 marks, −0.666666666666667Game Theory › Game theory and strategic behaviour › Incomplete information and auctionsModerateabout 3 min

DSE 2017 Question 8: Game theory and strategic behaviour

AAA sells an object by a sealed-bid auction with two bidders 111 and 222. Bidder iii has valuation viv_ivi​ and submits bid bib_ibi​; the object goes to the highest bidder (ties split equally). The winner pays min⁡{b1,b2}\min\{b_1,b_2\}min{b1​,b2​} and gets payoff vi−min⁡{b1,b2}v_i-\min\{b_1,b_2\}vi​−min{b1​,b2​}; a loser pays nothing (payoff 000). Each viv_ivi​ is private to bidder iii. To maximize her payoff, bidder iii must bid

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A sells an object by a sealed-bid auction with two bidders 1 and 2. Bidder i has valuation vᵢ and submits bid bᵢ; the object goes to the highest bidder (ties split equally). The winner pays min {b₁,b₂} and gets payoff vᵢ-min {b₁,b₂}; a loser pays nothing (payoff 0). Each vᵢ is private to bidder i. To maximize her payoff, bidder i must bid (A) bᵢ=vᵢ (B) bᵢ<vᵢ (C) bᵢ≤ vᵢ (D) bᵢ≥ vᵢ

Also written as: A sells an object by a sealed-bid auction with two bidders 1 and 2. Bidder i has valuation v_i and submits bid b_i; the object goes to the highest bidder (ties split equally). The winner pays min {b_1,b_2} and gets payoff v_i-min {b_1,b_2}; a loser pays nothing (payoff 0). Each v_i is private to bidder i. To maximize her payoff, bidder i must bid

Game theory and strategic behaviour has come up 61 times in 6 exams since 2008.

What this question tests

This question is on Incomplete information and auctions, part of Game theory and strategic behaviour in Game Theory.

Games where players do not know each other's types or values.

TestStop has 5 past-paper questions on this subtopic.

Practise Game theory and strategic behaviourMore on Incomplete information and auctions

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