What is your optimal bid, Suppose you and one other bidder

What is your optimal bid

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Reference no: EM131250103

Suppose you and one other bidder are competing in a private-value auction. The auction format is sealed bid, first price. Let v and b denote your valuation and bid, respectively, and let _n and bn denote the valuation and bid of your opponent.

Your payoff is - b if it is the case that b ≥ bn. Your payoff is 0 otherwise. Although you do not observe _n, you know that vn is uniformly distributed over the interval between 0 and 1. That is, is the probability that _n .

You also know that your opponent bids according to the function bn(vn) = vn2 . Suppose your value is 3/5. What is your optimal bid?

Reference no: EM131250103

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