Scenario: John, Jacob, Alex, and Maria participate in a first-price auction for an iPod. John values the iPod at $400, Jacob values it at $300, Alex values it at $250, and Maria values it at $200.
-Refer to the scenario above.Jacob should submit a bid of ________.
A) $500
B) $400
C) $300
D) $225

Question

Quizplus · Accepted Answer

In a first-price auction, the highest bidder wins but pays the price they bid. Jacob should bid just above the second-highest value to win the iPod at the lowest possible price. Since Alex values it at $250, Jacob should bid slightly more, e.g., $225 (assuming a strategic increment below Alex's valuation), to win while minimizing his payment.

Scenario: John, Jacob, Alex, and Maria Participate in a First-Price