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Presume that three risk-neutral bidders are interested in purchasing a Princess Beanie Baby. The bidders (numbered 1 through 3) have valuations of $12, $14, and $16, respectively. The bidders will compete in auctions as described in parts (a) and (b); in each case, bids can be made in $1 increments at any value from $5 to $25.

(1) Which bidder wins an open-outcry English auction and what are the final price paid and the profit to the winning bidder?

(2) Which bidder wins a second-price sealed-bid auction? What are the final price paid and the profit to the winning bidder? Contrast your answer here with that for part (a). What is the cause of the difference in profits in these two cases?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91225875

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