Imagine you are a buyer in a double oral auction with a reservation value of $13 and there is a seller asking for $7. If you accept this offer, you will gain $. (Enter your answer as an integer.)
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- Explain why a player in a sealed-bid, second-price auction would never submit a bid that exceeds his or her true value of the object being sold. (Hint: What if all players submitted bids greater than their valuations of the object?)Consider the following situation: five individuals are participating in an auction for an old bicycle used by a famous cyclist. The table below provides the bidders' valuations of the cycle. The auctioneer starts the bid at an offer price far above the bidders' values and lowers the price in increments until one of the bidders accepts the offer. Bidder Value ($) Roberto 750 Claudia 700 Mario 650 Bradley 600 Michelle 550 What is the optimal strategy of each player in this case? Who will win the auction if each bidder places his or her optimal bid? If Claudia wins the auction, how much surplus will she earn?You have three tickets to a Celtics game on a night that you are going to be out of town (so the value of unsold tickets is zero to you). There are only four possible buyers of a Celtics ticket. The table below lists the respective reservation prices of these four possible buyers: Customer Reservation Price 1 $25 2 $35 3 $50 4 $60 a) How much revenue can you generate using the English auction mechanism from the sale of the first ticket? [Bids can be made in increments of $1.00] b) How much revenue can you generate using the English auction mechanism from the sale of the second ticket? [Bids can be made in increments of $1.00] c) How much revenue can you generate using the English auction mechanism from the sale of the third ticket? [Bids can be made in increments of $1.00] d) How much total revenue can you generate using the English…
- Consider the following scenarios in the Ultimatum game, viewed from the perspective of the Recipient. Assume that the Recipient is motivated by negative reciprocity and will gain $15 of value from rejecting an offer that is strictly less than 50 percent of the total amount to be divided between the two players by the Proposer. Assume that the Proposer can only make offers in increments of $1. If the pot is $30, what is the minimum offer that the Responder will accept? What percent of the pie is this amount? The minimum offer that will be accepted is S. which represents percent of the pie. If the pot is $100, what is the minimum offer that the Responder will accept? What percent of the pie is this amount? The minimum offer that will be accepted is S, which represents percent of the pie. (Round answers to 2 decimal places as needed)If there is only one buyer and one seller meeting to exchange, then any price that they agree upon must be between the willingness to pay of the buyer and the willingness to sell of the seller.True or FalseIn Las Vegas, roulette is played on a wheel with 38 slots, of which 18 are black, 18 are red, and 2 are green (zero and double-zero). Your friend impulsively takes all $361 out of his pocket and bets it on black, which pays 1 for 1. This means that if the ball lands on one of the 18 black slots, he ends up with $722, and if it doesn't, he ends up with nothing. Once the croupier releases the ball, your friend panics; it turns out that the $361 he bet was literally all the money he has. While he is risk-averse - his utility function is u(x) =, where x is his roulette payoff - you are effectively risk neutral over such small stakes. a. When the ball is still spinning, what is the expected profit for the casino? b. When the ball is still spinning, what is the expected value of your friend's wealth? c. When the ball is still spinning, what is your friend's certainty equivalent (i.e., how much money would he accept with certainty to walk away from his bet). Say you propose the following…
- Consider the following game - one card is dealt to player 1 ( the sender) from a standard deck of playing cards. The card may either be red (heart or diamond) or black (spades or clubs). Player 1 observes her card, but player 2 (the receiver) does not - Player 1 decides to Play (P) or Not Play (N). If player 1 chooses not to play, then the game ends and the player receives -1 and player 2 receives 1. - If player 1 chooses to play, then player 2 observes this decision (but not the card) and chooses to Continue (C) or Quit (Q). If player 2 chooses Q, player 1 earns a payoff of 1 and player 2 a payoff of -1 regardless of player 1's card - If player 2 chooses continue, player 1 reveals her card. If the card is red, player 1 receives a payoff of 3 and player 2 a payoff of -3. If the card is black, player 1 receives a payoff of 2 and player 2 a payoff of -1 a. Draw the extensive form game b. Draw the Bayesian form game10 Use the expected value information to illustrate how having more bidders in an oral auction will likely result in a higher winning bid.Discrete All-Pay Auction: In Section 6.1.4 we introduced a version of an all- pay auction that worked as follows: Each bidder submits a bid. The highest bidder gets the good, but all bidders pay their bids. Consider an auction in which player 1 values the item at 3 while player 2 values the item at 5. Each player can bid either 0, 1, or 2. If player i bids more than player j then i wins the good and both pay. If both players bid the same amount then a coin is tossed to determine who gets the good, but again both pay. a. Write down the game in matrix form. Which strategies survive IESDS? b. Find the Nash equilibria for this game.
- Your friend bought two tickets to see James Taylor play at the Save-On Center, but now her partner can’t make it. You knew about the concert, but you decided you’re not a big enough fan to pay $100 for a ticket. On the other hand, she would have bought tickets even if they cost $150 each. If you assume that she cannot sell the ticket anywhere else, what is the minimum price you can offer her for the ticket that she will accept? Explain your answer.Consider a V-period alternating-offer bargaining game where two players bargain over a surplus initially equal to a whole-number amount V. That is, player 1 makes an offer in period 1; if player 2 rejects this offer, player 2 makes an offer in period 2; if player 1 rejects this offer, player 1 then makes another offer in period 3; and so on. Suppose that the available surplus decays by a constant value of c = 1 each period. (For example, if the players reach an agreement in period 2, they divide a surplus of V – 1.) If in period V, no agreement is reached, then both players get 0. Suppose that the players don't discount the future. Describe the subgame perfect Nash equilibrium of this game.Suppose you have $35,000 in wealth. You have the opportunity to play a game called "Big Bet/Small Bet." In this game, you first choose whether you would like to make a big bet of $15,000 of a small bet of $5,000. You then roll a fair die. If you roll a 4, 5, or 6, you win the game and earn $15,000 for the big bet or $5,000 for the small bet. If you roll a 1, 2, or 3, you lose and lose $15,000 for the big bet and $5,000 for the small bet the game Utility U₂ U₁ BEL 0 11 LATE EE ARTE Are the Small Bet and Big Bet considered fair bets? O Big Bet is fair, but Small Bet is not. No, both are not fair. Yes, both are fair. 20 OSmall Bet is fair, but Big Bet is not. G HA 1 35 D E 1 1 1 1 1 F 1 U 50 Income (thousands of dollars)