Is the probability that buyer 2 wins the auction equal to 1

Reference no: EM131332889

Consider a sealed-bid first-price auction with two buyers whose private values are independent; the private value of buyer 1 has uniform distribution over the interval [0, 3], and the private value of buyer 2 has uniform distribution over the interval [3, 4]. Answer the following questions:
(a) Prove that the following pair of strategies form an equilibrium

β_{1 (}v_{1) =}1+(v₁/ 2),

β2₍v_{2) =}(1 / 2₎+₍v₂/ 2),

(b) Is the probability that buyer 2 wins the auction equal to 1?

(d) Compute the seller's expected revenue in a sealed-bid second-price auction. Is that the same expected revenue as in part (c) above?

Reference no: EM131332889

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