Auctions And Bargaining Flashcards
Four types of auctions?
English, Dutch, first price, second price
Revenue Equivalence Theorem?
The four types of auctioning will yield the same revenues (under certain assumptions)
Sealed bid auction
Bids placed privately and without knowledge of other bid prices
Open auctions
Public and competitive bids
English: strat and outcome
Open, low to high
Strategy: Bid price < value
Outcome: winner pays second highest bid (to them bc it was below their value)
Dutch: strat and outcome
Open, high to low
Strat: bid = (n-1)/n value
Outcome: on average, winner pays second value
First price: strat and outcome
Sealed bid, sell to highest bidder at their price
Strat: bid = (n-1)/n value
Outcome: on average, winner pays 2nd value
Second price: strat and outcome
Sealed bid, highest bidder wins but pays the price of the second highest bid
Strat: price = value
Outcome: winner pays second highest bid
Ultimatum games involve two choices, what are they?
Accept or reject
Bargaining power determines what?
Relative power one has to influence negotiations
Determines terms of exchange - price and if the trade will occur
What two entities exist in a game tree?
Proposer and responder
What is the proposers strategy in SPNE?
Propose as small an offer possible (price wise)
What will the responder do in SPNE?
Will accept/take anything above zero
Who auctioned off the Roman Empire in 193 AD?
The Praetorian Guard
Coase Thm?
Invisible hand idea: efficiency of economic allocation from bargaining (even with externalities)
