Question

Consider a sealed-bid auction in which the seller draws one of the N bids at random. The buyer whose bid was drawn wins the auction and pays the amount bid. Assume that buyer valuations follow a uniform(0,1) distribution.

1. What is the symmetric equilibrium bidding strategy b(v)?

2.What is the seller’s expected revenue?

3.Why doesn’t this auction pay the seller the same revenue as the four standard auctions? That is, why doesn’t the revenue equivalence theorem apply here? Be specific.

Answer 1

1) Symmetric eqilibrium bidding strategy- A bid strategythat automaticaly sets bids for your ads based on that ads likelihood to result in a click or conversion. where sales is not confirmed to the subject for which bid taken on behalf of seller,and the auctioneer knowingly takes any bid from the seller or any such person ,the sales shall be treated as by the buyer. suppose if the seller has not notified of his right to bid he may not do so under any circumstances,Then neither the seller nor any person on his behalf can bid at the auction .if done then it will be void .The auctioneer also cannot accept such bids from the seller or any other person on his behalf.

2) Seller's  expectated Revenue- Auction sales completed with the fall of hammer but the seller's expected revenue, as we know an auction sale is a process of buying and selling the item to the highest bidder.Parcipants bid only opens aginst one after one just after every subsequent bid required ahigher amount than previous one.If values are common rather thanindependent,the next auction yields higher seller revenue,In a sealed bidsecond price auction is the best strategy for any seller is to bid her true value.Therefore the expected revenue of the seller will be the value of second highest value.

2) Auction theory is an applied branch of economics which deals with situation and reaction of peple when bidding occurs.Yes the revenue Equivalance theorem doesnt applied here and seller does not get the same expected revenue because any auction form having the same expected revenue.