Use the following statements to answer this question: I. The expected revenue generated by first-price and second-price sealed-bid auctions is the same.
II) The winner's curse implies that the buyer of an auctioned item will likely be the person who made the largest positive error in their estimated value of the item.
A) I and II are true.
B) I is true and II is false.
C) II is true and I is false.
D) I and II are false.

Question

Quizplus · Accepted Answer

In auction theory, the Revenue Equivalence Theorem states that under certain conditions, first-price and second-price sealed-bid auctions yield the same expected revenue. The winner's curse refers to the tendency of the winning bidder to overestimate the value of an auctioned item, leading to a higher bid than the item's actual value.

Use the Following Statements to Answer This Question: I