# Consider an auction in which bidders are cash-constrained. As in the model we saw in class, there is one object for sale and n ≥ 2 bidders. Each bidder i has a valuation vi drawn from a uniform distri

Consider an auction in which bidders are cash-constrained. As in the model we saw in class, there is one object for sale and n ≥ 2 bidders. Each bidder i has a valuation vi drawn from a uniform distribution in [0, 1]. The valuation of each bidder is independently distributed.The new feature relative to what we saw in class is that bidders are cash-constrained. In partic- ular, each bidder i is subject to a budget wi: in no circumstances can a bidder with budget wi pay more than wi. If bidder i were to bid more than wi and defaults, then a (small) penalty is imposed on her.Assume that each bidder’s budget wi is also drawn from a uniform distribution on [0, 1]. Assume that each bidder’s budgets are independently distributed (and are also independently distributed from the signals). At the beginning of the auction (i.e., before submitting bids) each bidder learns her own valuation vi and her own budget wi, but not the signals and budgets of her opponents. After observing her signal and budget, each bidder has to choose which bid to submit.Suppose that the auction format is a second-price auction: the player who submitted the highest bid wins, but pays a price equal to the second highest bid. Show that, for each bidder, bidding her own budget always gives a higher payoff than bidding above her budget. Consider a bidder with valuation vi ≤ wi. Show that, in this case, bidding her own valuation gives her a higher payoff than any other bid. Hint: recall the arguments we used in class to show that in a standard second-price auction it is optimal for each bidder to submit a bid equal to her valuation. Consider a bidder with valuation vi > wi. Show that, in this case, bidding her own budget gives the bidder a higher payoff than any other bid. Use your answers to parts (b) and (c) to conclude that each bidder submits a bid equal b(x, w) = min{x, w}.

Don't use plagiarized sources. Get Your Custom Essay on
Consider an auction in which bidders are cash-constrained. As in the model we saw in class, there is one object for sale and n ≥ 2 bidders. Each bidder i has a valuation vi drawn from a uniform distri
Just from \$13/Page

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors:
Number of pages
Urgency
Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

# Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

### Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

### Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

### Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

### Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Order your essay today and save 15% with the discount code BANANA