Revenue equivalence_______ hold when the item being auctioned has independent private values and_______ hold when the item being auctioned has a common value.

Question

Quizplus · Accepted Answer

Revenue equivalence holds when bidders have independent private values, meaning that each bidder's value for the item being auctioned is not affected by the other bidders. In this case, the revenue generated from different auction formats will be the same. However, when the item being auctioned has a common value, such as an oil field or a rare painting, revenue equivalence does not hold because bidders are not only concerned about their own valuations, but also about the valuations of others. This can cause bidding strategies to change and affect the final revenue generated by different auction formats.

Revenue Equivalence_______ Hold When the Item Being Auctioned Has Independent