Simple auction 2 Flashcards
What is the expected payoff in a first-price auction?
Prob(Winning) x (v-b)
Why is truthful bidding not optimal in first-price
Paying v, means no payoff
What is the formula for an optimal bid in first-price?
s(V) = n-1/n x v
Compare Dutch auction and first price
Dutch auction and first price are strategically equivalent (it’s a tradeoff between probability of winning and the bid. Bidding truthfully is not a dominant strategy.
What can you say about the expected revenue from 1st price and 2nd price auctions?
Expected revenue is the same for 1st price and 2nd price auctions
What is the optimal reserve price?
The highest valuation / middle of the PDF
Give the formula for an optimal vickrey auction with a reserve price
virtual valuation (r) = r - 1-F(r)/f(r) = 0
What can a virtual valuation be interpreted as?
Virtual valuation of a bidder is the marginal revenue bought by a bidder.
What did (Burlow & Klemperer, 1996) say about the optimal reserve price?
Optimal reserve price is difficult to calculate in the real world, and adding a new bidder (n+1) provides more additional revenue than finding the optimal reserve price, meaning it might be better to just add more people.
What do the English and dutch auction have in common?
they are dynamic (have a ticking price)
What do the Vickrey (second-price) and the first-price auction have in common?
They are both simultaneous (there is no ticking price)
In which two auctions is truthful bidding a dominant strategy?
English and Vickrey
In which two auctions is truthful bidding not a dominant strategy?
Dutch and first-price
What are the 4 conditions for the revenue equivalence theorem to hold between a first price sealed-bid action and a second price sealed bid?
-Bidder’s valuations are private and identically and independently distributed over an interval
- Strictly increasing CDF
- Winner is always the bidder with the highest V
- The bidder with the lowest possible valuation has zero expected payoff.
