Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Negotiations > Auctions - Module 4 > Flashcards

Auctions - Module 4 Flashcards

1
Q

What does auction theory help create?

A

Institutions, e.g. auctions, markets, matching processes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What 3 main purposes does mechanism design serve to optimise?

A

Efficiency
Allocation
Information discovery

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Through what actions do auctions elicit information?

A

Bids

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are the two key properties of auctions?

A

They are universal, any type of good or service

They are anonymous, identity doesn’t play a role

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is a forward auction?

A

One seller, many buyers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is a reverse auction?

A

Many sellers, one buyer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is a double auction?

A

Many sellers, many buyers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the key difference between sealed-bid and open format auctions?

A

Information is revealed either only to the auctioneer, or publically

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What price is paid in a first price reverse auction?

A

The lowest price bid

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What’s another name for a second-price auction?

A

Vickrey auction

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What’s another name for an auction with time constraints?

A

Auction by the candle

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What does it mean that private values for a good are i.i.d?

A

Independent, other’s valuation doesn’t affect my own
Identically distributed, probability my value is less than x is the same probability that someone else’s value is also less than x. Anonymous

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What special case do we consider when considering the distribution and expectations of private values?

A

Private values follow uniform distribution [0,1]

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Given that private values are i.i.d and follow the uniform distribution [0,1], what is the expected maximum value with N agents?

A

N/(N+1)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

If private values are i.i.d and follow the uniform distribution [0,1] what is the second highest expected value, where x is the highest value?

A

((N-1)/N)*x

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

If private values are i.i.d and follow uniform distribution [a,b] what is the expected maximum value?

A

a + (N/(N+1))*(b-a)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

If private values are i.i.d and follow uniform distribution [a,b], and the highest expected value is z, what is the second highest expected maximum value?

A

x = (z-a)/(b-a)

a + ((N-1)/N)x(b-a)

18
Q

In a second-price sealed bid auction with private values and risk neutrality, what is the dominant strategy for agent i to bid?

A

Their full private value

19
Q

Given private values are i.i.d and follow uniform distribution [0,1] in a second price sealed-bid auction, what price should agent i expect to pay?

A

((N-1)/N)*vi (vi=their private valuation)

20
Q

In an English auction with private values, which agent wins?

A

The one with the highest value

21
Q

In an English auction with private values, what does the agent that wins pay?

A

Roughly the second price

22
Q

In a first-price sealed-bid auction with i.i.d private values following a uniform distribution and risk neutrality, what is the symmetric Nash equilibrium strategy?

A

bi = ((N-1)/N)*vi

23
Q

Assuming CRRA, what is the expected utility of agent i?

A

bi = ((N-1)/(N-1+p))*vi

24
Q

If risk aversion =1, what does the expected utility of agent i equal?

A

bi = vi

25
Q

In a Dutch auction with i.i.d private values following a uniform distribution and risk neutrality, what is the symmetric Nash equilibrium strategy?

A

bi = ((N-1)/N)*vi

26
Q

With i.i.d private values following a uniform distribution and risk neutrality, a first-price sealed-bid auction is theoretically equivalent to which other auction?

A

Dutch auction

27
Q

What does risk aversion lead to in a first-price sealed bid auction and a Dutch auction?

A

Pushes bids closer to the agent’s private value rather than the expected second highest value

28
Q

Which auction allows us to observe private values?

A

Second-price sealed-bid auction

29
Q

Why do Dutch, English and first-price sealed-bid auctions not offer the opportunity to observe private values?

A

Because optimal bidding strategy is to bid some fraction of private values

30
Q

What do strategies in second-price sealed bid and English auctions have in common when values are private?

A

Beliefs about others’ values do not influence my strategy

31
Q

Which auction is theoretically equivalent to a Dutch auction?

A

First-price sealed-bid

32
Q

Which auction is theoretically equivalent to First-price sealed-bid?

A

Dutch auction

33
Q

What is the revenue equivalence principle?

A

When private values are i.i.d and agents are risk neutral, the expected revenue of the seller is the same in all 4 auctions. the expected utility of the buyer is also the same for all 4 auctions.

34
Q

What is the expected revenue for the seller in all 4 auctions with private values that are i.i.d and agents are risk neutral?

A

(N-1)/(N+1)

35
Q

What are the two possible goals when choosing an auction?

A

Information revelation and maximising revenue

36
Q

What auctions tend to maximise revenues when private values are not i.i.d?

A

English, followed by second-price sealed-bid, followed by first-price sealed-bid

37
Q

In what auctions does risk neutrality affect strategies?

A

Risk averse bidders bid more in first-price sealed-bid and Dutch auctions with private values

38
Q

When might it be best not to play the symmetric Nash equilibrium strategy?

A

If you think others aren’t playing the symmetric Nash equilibrium strategy?

39
Q

What is the key benefit of being a big player?

A

Having the ability to impose the rules of the game

40
Q

What do we call a negotiation where there is one seller and one buyer?

A

Bilateral negotiation

41
Q

What is the revenue equivalence principle?

A

If all bidders are risk neutral with i.i.d private values, the 4 auction formats should generate the same expected price paid/revenue

42
Q

In a reverse Dutch or first-price sealed-bid auction, how does risk aversion impact the buyer?

A

Increases revenue

Negotiations (7 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions