Lesson 1
Naive Bidding
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We discuss auctions. We first distinguish two extremes: common values and private values. We hold a common value auction in class and discover the winner's curse, the winner tends to overpay. This leads you to bid much below your initial estimate. Then we discuss four forms of auction: first-price sealed-bid, second-price sealed-bid, open ascending, and open descending auctions. We discuss bidding strategies in each auction form for the case when values are private. Finally, we start to discuss which auction forms generate higher revenues for the seller, but a proper analysis of this will have to await the next course. Polak, Ben. ECON 159, Game Theory, Fall 2007. Yale OpenCourseWare: Economics, Accessed 04/10/14 http://oyc.yale.edu/economics/econ-159/lecture-24 License: Creative Commons BY-NC-SA

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