CSCE 782: Problem Set 8
Due: 12 December 2000
This is an extra-credit problem set.
Problem 1 (30%):
- What is the dominant strategy in an English private value auction?
- What is the dominant strategy in an English common value auction?
- What is the dominant strategy in a first-price sealed bid
private-value auction?
- What is the dominant strategy in a first-price sealed-bid
common-value auction?
- What is the revenue difference between a first-price
sealed-bid auction and a Dutch auction?
Problem 2 (30%): If the long distance companies offered
to bid money to place each one of your long distance calls
(after you tell them the number you want to call), which type of
auction would provide the best incentive for them to continue to
improve their technologies and lower their cost (thereby
lowering the amount you pay)? why?
Problem 3 (40%): Two agents are trying to decide how to
split a dollar bill. Agent 1 makes an offer, then 2 counter
offers, then 1 counter-counter offers, and so on. (Assume we are
using strategic bargaining theory to solve this).
- If they can only do this for four rounds, what is the final
outcome?
- If they can only do this for five rounds, what is the final
outcome?
- If the dollar loses .2 of its value (i.e., it is worth 1,
.8, .64, ...) what is the final outcome after four rounds?
- If the dollar loses .2 of its value (i.e., it is worth 1,
.8, .64, ...) what is the final outcome after an infinite number
of rounds?
Jose M. Vidal
Last modified: Thu Nov 16 13:50:18 -0500 2000