The table above lists the independent private values of five participants in an auction. Each of the bidders only knows their o value and does not know the private values of the other participants.
-Refer to the table above. Recall that the bidders only know their own private value of the item and they do not know the other participants' private values. Further, assume each participant will submit bids using their optimal strategy. If the participants are bidding in a sealed- bid first- price auction, Bidder ________ wins the auction and pays ________ .

Question

Quizplus · Accepted Answer

In a first-price sealed-bid auction, the highest bidder wins the auction and pays their bid amount. Based on the table, Bidder 3 has the highest private value at $10 million, so they would be the winner of the auction. However, since they only need to pay the amount of the second highest bid (which is Bidder 5's private value of $9.5 million) and not their own bid amount, the winning bid would be a value less than $10 million and greater than $9.5 million. Therefore, option C is the best choice.

The Table Above Lists the Independent Private Values of Five