Question

e are allowed to submit bids at made so far will 776) is being auctioned via the onted only if they exceed 4. First Fiddler's Bank has foreclosed on a home mortsage and is selling the house af auction. three bidders for the house, pay of these three bidd There are e, Emie, Minnie, and Betsy. First Fiddler's does not know the willingness to and Betsy ers for the house, but on the basis of its previous experience, the bank believes valuing at $400,000, ese bidders has a probability of 1/3 of valuing it at $700,000, a probability of 1/3 of and a probability of 1/3 of valuing it at $300,000. First Fiddler's believes that mong buyers. If First Fiddler's sells the house by means of a these probabilities are independent a econd-bidder, sealed-bid auction (Vickrey auction), what will be the bank's expected revenue from the sale? (Choose the ch a. $400,000 b. $451,852 c. $466,667 osest option.)구ortーて?00000 ?000 d. $700,000 e. $300,000 ANS: B

Answer 1

In a Vickrey auction or second price auction, three bidders will be asked to submit sealed bids.

The bidder who submits the highest bid is awarded the property but will pay the amount equal to the amount bid by the second highest bidder.

Emie	Minne	Besty
700000	400000	300000

Submit the bid in sealed-bid,

As per the Vickery auction, Emie is awarded the property and will pay the amount equal to amount bid by Minne i.e. $400,000