Consider an antique auction where bidders have independent private values.There are two bidders, each of which perceives that valuations are uniformly distributed between $100 and $1000.One of the bidders is Sue, who knows her own valuation is $200.What is Sue's optimal bidding strategy in a first-price sealed-bid auction:

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Quizplus · Accepted Answer

Sue's optimal bidding strategy is to submit a bid of $150. This is because she knows her own valuation is $200, and she wants to win the auction if and only if the other bidder's valuation is less than $200. By bidding $150, she will win the auction if the other bidder's valuation is less than $150, and she will lose the auction if the other bidder's valuation is greater than or equal to $150. This is the optimal strategy because it maximizes her expected payoff.

Consider an Antique Auction Where Bidders Have Independent Private Values