Ask Question, Ask an Expert

+61-413 786 465

Ask Microeconomics Expert

Answer the problems below as best as you can – you can answer formally, or informally; however, when possible, formal answers might be more precise, and to that effect convincing.

problem: As in class there is some set N of bidders in an auction of one object, which the seller of the object can deliver at 0 cost. Suppose each bidder i’s valuation of the object is given by some parameter vi ≥ 0 which is only known to bidder i.

1) Suppose the auction format is the first-price auctions, where bidders simultaneously prepare their bids, submit them, and the winning bidder (the one with the highest bid) pays her bid. Would bidders want to bid their valuations, below their valuations, or above their valuations?

2) Suppose now that the auction proceeds as follows: initially some low price is announced, say p0 = 0, and it keeps being increased continuously through time, e.g., at time t, p(t) = t. At each moment, all biders who still want to remain in the auction keep their hands raised; at the moment a bidder wants to drop out she lowers her hand (and she can’t raise it again). The object is awarded to the last bidder with the raised hand. At what price would a bidder want to lower her hand?

3)  Suppose that each bidder i’s valuation of the object is now given by mini∈N vi, where still only vi is known to bidder i (so now in most cases she can’t be certain about the value of the object). All bidders again simultaneously submit their bids (e.g., in sealed envelopes), and the object is awarded to the highest bidder at the price p = 1/N ∑i∈N bi, where bi is the bid of bidder i. How would the bidders want to bid now?

4) For the case where each bidders’ valuation is given by vi (only known to i), what would you suggest to the seller if he wanted to devise the auction to raise as much revenue as possible?

problem: There are now a number of sellers from set M, and buyers from set N. Each seller j can deliver one unit of the good at some price cj ≥ 0which is only known to him, and each buyer i desires to buy at most one unit of the good, which she values at vi, only known to her.

1) Suppose there is only 1 seller. He runs an auction in which the winning bidder (the highest bidder) pays the price equal to the second-highest bid. If the seller wanted to make sure to not make a loss, what would he want to add to the rules of the auction?

2) Suppose there is only 1 buyer and the sellers now simultaneously propose different auction formats to her. She then decides with which seller she will go. What kind of auction formats would sellers propose to the buyer?

3) To make things simple suppose now that 0 ≤ c1 ≤ c2 ≤ ≤ 1 and 0 ≤ vn ≤vn−1... ≤ v1 ≤ v0. Think of sellers as the supply and buyers as the demand.

Further assume that k is the number such that ck < vk but ck+1 > vk+1, and that it so happens that ck < vk+1 < ck+1 < vk.

i) What does k represent? (Draw a graph)

ii) Suppose sellers and buyers simultaneously prepare their asks (sellers) and bids (buyers) and submit them. The price pa that the sellers obtain is determined as the minimal submitted bid (call it b), such that all sellers who deliver the goods at that bid were actually asking less than b (suppose that the number of sellers with such asks were!), and such that there were exactly l buyers who were bidding more than b. The price pb is similarly determined as the maximal ask (call it ¯ a), such that there are buyers who bid more, and l sellers who ask for less. In the con?guration above (sellers and buyers don’t know that is the con?guration) would sellers want to prepare down their costs as their asks and would buyers want to prepare down their valuations as their bids? Why or why not?

(iii) In the market system considered in part (ii) would the final allocation be Pareto efficient? Why or why not? (Do not forget to take into account important details).

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M9310

Have any Question? 

Related Questions in Microeconomics

Question a assuming a competitive labor market use a labor

Question: a. Assuming a competitive labor market, use a labor supply and demand diagram to illustrate what will happen to wages and employment if the demand for the product being produced decreases. b. Assuming a monopso ...

Question assignment descriptionfor this assignment you need

Question: Assignment Description For this assignment, you need to choose an industry and then analyze the growth pattern of that industry during periods of recession and periods of expansion. Examples of industries that ...

Question - the general mills company gmc purchased a

Question - The General Mills Company (GMC) purchased a milling machine for $90,000, which it intends to use for the next five years. This machine is expected to save GMC $31,000 during the first operating year. Then the ...

Question you are making 1000 monthly deposits into a fund

Question: You are making $1000 monthly deposits into a fund that pays interest at a rate of 6% compounded monthly. What would be the balance at the end of 10 years? The response must be typed, single spaced, must be in t ...

Question - over the past 50 years the number of hurricanes

Question - Over the past 50 years, the number of hurricanes that have been reported are as follows: 9 times there were 6 hurricanes, 14 times there were 8 hurricanes, 19 times there were 10 hurricanes, and in the remaini ...

Question -most people conclude that the costs outweigh the

Question - Most people conclude that the costs outweigh the benefits of a suicide bombing attack; yet, some people willingly engage in such activity. Are they miscalculating the cost/benefit problem, or do they simply va ...

Question the abc corporation has an investment opportunity

Question: The ABC Corporation has an investment opportunity that costs $175,000 and 9 years later pays a lump-sum amount of $415,000. What percent interest rate per year would be earned on this investment. Calculate your ...

Question during past recessions housing prices generally

Question: During past recessions, housing prices generally rose much less than usual, and fell in real terms. Yet in the 2001 recession, housing prices rose much more than average. What factors caused them to rise so rap ...

Question 1 discuss the significance and the impact that the

Question: 1) Discuss the significance and the impact that the environment has on human health. Provide examples and discuss how they relate to the practice of public health today. Your response should be at least 210 wor ...

Question 1 given the current state of the economy what

Question: 1. Given the current state of the economy, what should Fed. Do with monetary policy and why? 2. Compare the pros and cons of independent central bank? 3. Compare pros and cons of monetary rule and discretionary ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As