Which of the following is the dominant strategy when bidding in an auction?
A) Bid less than your reservation price to earn a larger surplus.
B) Bid more than your reservation price if you really want to win the auction.
C) Never bid your reservation price, because you will realize no surplus if you win the auction.
D) Always bid up to, but not above, your reservation price.
E) The dominant strategy depends on the type of auction.

Question

Quizplus · Accepted Answer

The dominant strategy in an auction is always to bid up to your reservation price but not above it. Bidding less than your reservation price or never bidding your reservation price can result in not winning the auction or not maximizing your surplus. Bidding more than your reservation price can result in overpaying and not maximizing your surplus. The answer is not E because although the type of auction can affect bidding strategies, the question is asking about the dominant strategy in general.

Which of the Following Is the Dominant Strategy When Bidding