Consider an antique auction where bidders have independent private values.There are two bidders,each of whom perceives that valuations are uniformly distributed between $100 and $1,000.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

In a first-price, sealed-bid auction, the optimal strategy for a bidder is to bid less than their actual valuation to maximize their payoff, assuming they win. Since Sue values the item at $200, she should bid less than $200 to ensure she gains a positive payoff if she wins. A bid of $150 is strategically chosen to be below her valuation but high enough to have a chance of winning, considering the uniform distribution of valuations between $100 and $1,000.

Consider an Antique Auction Where Bidders Have Independent Private Values