Consider a second price auction with 2 bidders, 1 and 2, who have values for the...

Consider a second price auction with 2 bidders, 1 and 2, who have values for the good of 20 and 80, respectively. Each knows what the other bidder’s valuation is so there is no uncertainty.

(a) Show that choosing a bid equal to one’s valuation is a weakly dominant strategy for bidder 1.

(b) Show that if each bidder plays a weakly dominant strategy, the bidder with the highest value always wins the good

(c) Is it a Nash equilibrium for bidder 1 to bid 60 and bidder 2 to bid 80? Which bidder is playing a weakly dominated strategy?

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Expert Solution

Rahul Sunny answered 1 year ago

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