Temple University

Department of Economics

Economics 92: Principles of Micro (Honors)
Homework 11

Auctions

Name

Social Security

State which auction types have equivalent expected payoffs for the seller:

In the two sealed bid auctions, a 1st price and a 2nd price, we did in class the expected revenue to the seller was the same.  This is not a general conclusion.

Define independent private values as the circumstance that arises when each bidder knows her own valuation of the object.  This valuation is formed independently and is unknown ro others.

Define common value as the circumstance that arises when the item has the same value to all bidders, but this value is not known to any of them with certainty.

Independent Values: The English oral auction and the sealed bid 2nd price auction yield the same expected revenue to the seller.

Common value: The oral English auction yields greater expected revenue to the seller than does a sealed second price auction.

Regardless of how the good is valued, the oral Dutch auction and the sealed bid first price auction yield the same expected revenue to the seller.