Purchase Solution

Vickerey

Not what you're looking for?

Ask Custom Question

Suppose someone is selling some object in the following (kind of unusual) way. Everyone who wants to buy the object writes down a number. The person who wrote the highest number gets to buy the object, but gets charged the second highest number. All player's have a private value from the object, which is random.

Suppose that your value for the object is v.

1. Would you ever bid more than v regardless of how the other players bid? Explain.
2. Would you ever bid less than v regardless of how the other players bid? Explain.
3. What will happen in this auction?

Attachments
Purchase this Solution

Solution Summary

Vickerey is exhibited. The expert examines a big which is more than v regardless of how the other players bid.

Solution Preview

Please see the attached file.

Suppose someone is selling some object in the following (kind of unusual) way. Everyone who wants to buy the object writes down a number. The person who wrote the highest number gets to buy the object, but gets charged the second highest number. All player's have a private value from the object, which is random.

Suppose that your value for the object is v.

1. Would you ever bid more than v regardless of how the other players bid? Explain.

This type of auction is called Vickerey (Second Price) Auction. The highest bidder wins the prize but pays the second highest bid. I would not bid for more than v irrespective of how the other player bid. Vickerey auctions have the property that bidding the item's true value is a player's optimal strategy.

If I bid more than my value for the object the utility of the bid would be less than the case where I bid my ...

Purchase this Solution


Free BrainMass Quizzes
Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.