When an item being auctioned has correlated values and bidders use their optimal strategies, a(n) _______auction has the highest expected revenue as it has the _______reduction in bidders' valuations.

Question

Quizplus · Accepted Answer

When values are correlated and bidders use their optimal strategies, the English auction has the highest expected revenue as it allows for incremental bidding, which reduces the risk of bidder's regret and does not immediately reveal the other bidders' valuations. In contrast, the Dutch auction would lead to a quick and significant reduction in bidders' valuations, reducing the expected revenue. Therefore, the best choice is B, the English auction with the smallest reduction in bidders' valuations.

When an Item Being Auctioned Has Correlated Values and Bidders