The document summarizes several models of oligopoly and competition:
1) Cournot's model of oligopoly models firms competing on quantity, with the market price determined by total output. The Nash equilibrium has each firm producing a third of the competitive output.
2) Bertrand's model has firms competing on price, with the firm charging the lowest price capturing the entire market. The unique Nash equilibrium is for both firms to charge the marginal cost price.
3) Hotelling's model of electoral competition shows that when candidates choose policy positions, the Nash equilibrium has both candidates converging to the median voter's preferred position.
4) The War of Attrition models a conflict as a game of waiting, with the
Students should be able to:
Understand the assumptions of perfect competition and be able to explain the behaviour of firms in this market structure.
Understand the significance of firms as price-takers in perfectly competitive markets. An understanding of the meaning of shut-down point is required. The impact of entry into and exit from the industry should be considered.
Students should be able to:
Understand the assumptions of perfect competition and be able to explain the behaviour of firms in this market structure.
Understand the significance of firms as price-takers in perfectly competitive markets. An understanding of the meaning of shut-down point is required. The impact of entry into and exit from the industry should be considered.
Break-even analysis is a study of costs, revenues and sales of a firm and find out the volume of sales where the firm’s costs and revenues will be equal. The Break-even point is the zone of no-profit and no-loss as the costs equal revenues.
It is the oldest exchange and most of the index heavy weight stocks are traded in this exchange. The BSE 30 includes the top 30 stocks by market capitalization and this represents the Indian Sensex.
Break-even analysis is a study of costs, revenues and sales of a firm and find out the volume of sales where the firm’s costs and revenues will be equal. The Break-even point is the zone of no-profit and no-loss as the costs equal revenues.
It is the oldest exchange and most of the index heavy weight stocks are traded in this exchange. The BSE 30 includes the top 30 stocks by market capitalization and this represents the Indian Sensex.
I am Irene M. I am a Computer Network Assignments Expert at computernetworkassignmenthelp.com. I hold a Master's in Computer Science from, the California University of Technology. I have been helping students with their assignments for the past 10 years. I solve assignments related to the Computer Network.
Visit computernetworkassignmenthelp.com or email support@computernetworkassignmenthelp.com.
You can also call on +1 678 648 4277 for any assistance with the Computer Network Assignments.
I am Tim D. I am a Computer Network Assignment Expert at computernetworkassignmenthelp.com. I hold a Master's in Computer Science from, West Virginia University, USA. I have been helping students with their assignments for the past 15 years. I solve assignments related to the Computer Network.
Visit computernetworkassignmenthelp.com or email support@computernetworkassignmenthelp.com.
You can also call on +1 678 648 4277 for any assistance with the Computer Network Assignment.
Expense constrained bidder optimization in repeated auctions.
the nature of what this budget limit means for the bidders themselves is somewhat of a mystery. There seems to be some risk control element to it, some purely administrative element to it, some bounded-rationality element to it, and more...
A two parameter model for expense constraints in online budgeting problems.
Optimal bid can be mapped to static auction with a shaded virtual valuation.
Paper has more contents: MFE analysis and a finite horizon model.
We develop a new method to optimize portfolios of options in a market where European calls and puts are available with many exercise prices for each of several potentially correlated underlying assets. We identify the combination of asset-specific option payoffs that maximizes the Sharpe ratio of the overall portfolio: such payoffs are the unique solution to a system of integral equations, which reduce to a linear matrix equation under suitable representations of the underlying probabilities. Even when implied volatilities are all higher than historical volatilities, it can be optimal to sell options on some assets while buying options on others, as hedging demand outweighs demand for asset-specific returns.
This is the entrance exam paper for ISI MSQE Entrance Exam for the year 2013. Much more information on the ISI MSQE Entrance Exam and ISI MSQE Entrance preparation help available on http://crackdse.com
Non-linear optimization applications in finance including volatility estimation with ARCH and GARCH models, line search methods, Newton's method, steepest descent method, golden section search method, and conjugate gradient method.
This is the entrance exam paper for ISI MSQE Entrance Exam for the year 2009. Much more information on the ISI MSQE Entrance Exam and ISI MSQE Entrance preparation help available on http://crackdse.com
Yes of course, you can easily start mining pi network coin today and sell to legit pi vendors in the United States.
Here the telegram contact of my personal vendor.
@Pi_vendor_247
#pi network #pi coins #legit #passive income
#US
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
How to get verified on Coinbase Account?_.docxBuy bitget
t's important to note that buying verified Coinbase accounts is not recommended and may violate Coinbase's terms of service. Instead of searching to "buy verified Coinbase accounts," follow the proper steps to verify your own account to ensure compliance and security.
Seminar: Gender Board Diversity through Ownership NetworksGRAPE
Seminar on gender diversity spillovers through ownership networks at FAME|GRAPE. Presenting novel research. Studies in economics and management using econometrics methods.
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the telegram contact of my personal pi vendor
@Pi_vendor_247
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
BYD SWOT Analysis and In-Depth Insights 2024.pptxmikemetalprod
Indepth analysis of the BYD 2024
BYD (Build Your Dreams) is a Chinese automaker and battery manufacturer that has snowballed over the past two decades to become a significant player in electric vehicles and global clean energy technology.
This SWOT analysis examines BYD's strengths, weaknesses, opportunities, and threats as it competes in the fast-changing automotive and energy storage industries.
Founded in 1995 and headquartered in Shenzhen, BYD started as a battery company before expanding into automobiles in the early 2000s.
Initially manufacturing gasoline-powered vehicles, BYD focused on plug-in hybrid and fully electric vehicles, leveraging its expertise in battery technology.
Today, BYD is the world’s largest electric vehicle manufacturer, delivering over 1.2 million electric cars globally. The company also produces electric buses, trucks, forklifts, and rail transit.
On the energy side, BYD is a major supplier of rechargeable batteries for cell phones, laptops, electric vehicles, and energy storage systems.
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
1. Cournot’s model of oligopoly
• Single good produced by n firms
• Cost to firm i of producing qi units: Ci(qi), where Ci is
nonnegative and increasing
• If firms’ total output is Q then market price is P(Q),
where P is nonincreasing
Profit of firm i, as a function of all the firms’ outputs:
πi(q1, . . . , qn) = qiP
n
j=1
qj
− Ci(qi).
Strategic game:
• players: firms
• each firm’s set of actions: set of all possible outputs
• each firm’s preferences are represented by its profit
1
2. Example
• two firms
• inverse demand:
P(Q) = max{0, α − Q} =
α − Q if Q ≤ α
0 if Q > α
• constant unit cost: Ci(qi) = cqi, where c < α.
0 Q →
↑
P(Q)
α
@
@
@
@
@
@
@
@
@
@
@@
α
2
3. Nash equilibrium
Payoff functions
Firm 1’s profit is
π1(q1, q2) = q1(P(q1 + q2) − c)
=
q1(α − c − q2 − q1) if q1 ≤ α − q2
−cq1 if q1 > α − q2
Best response functions
Firm 1’s profit as a function of q1:
0
a - c
q
2
= 0
q
1
q
2
> 0
a - c - q
2
a
profit of
firm 1
Up to α − q2 this function is a quadratic that is zero when
q1 = 0 and when q1 = α − c − q2.
3
4. So when q2 is small, optimal output of firm 1 is (α − c − q2)/2.
As q2 increases this output decreases until it is zero.
It is zero when q2 = α − c.
Best response function is:
b1(q2) =
(α − c − q2)/2 if q2 ≤ α − c
0 if q2 > α − c.
Same for firm 2: b2(q) = b1(q) for all q.
H
H
H
HH
H
HH
H
H
HH
A
A
A
A
A
A
A
A
A
A
A
A
q
0 α−c
2
α − c
α−c
2
α − c
↑
q2
q1 →
b1(q2)
b2(q1)
4
5. Nash equilibrium
Pair (q∗
1, q∗
2) of outputs such that
each firm’s action is a best response to the other firm’s action
or
q∗
1 = b1(q∗
2) and q∗
2 = b2(q∗
1) :
H
H
H
HH
H
HH
H
H
HH
A
A
A
A
A
A
A
A
A
A
A
A
q
0
......................................
α−c
3
α−c
2
α − c
α−c
3
α−c
2
α − c
↑
q2
q1 →
b1(q2)
b2(q1)
(q∗
1, q∗
2)
or q1 = (α − c − q2)/2 and q2 = (α − c − q1)/2.
Solution:
q∗
1 = q∗
2 = (α − c)/3.
5
6. Conclusion
Game has unique Nash equilibrium:
(q∗
1, q∗
2) = ((α − c)/3, (α − c)/3)
At equilibrium, each firm’s profit is (α − c)2
/9.
Note: Total output 2(α − c)/3 lies between monopoly output
(α − c)/2 and competitive output α − c.
6
7. Bertrand’s model of oligopoly
Strategic variable price rather than output.
• Single good produced by n firms
• Cost to firm i of producing qi units: Ci(qi), where Ci is
nonnegative and increasing
• If price is p, demand is D(p)
• Consumers buy from firm with lowest price
• Firms produce what is demanded
Firm 1’s profit:
π1(p1, p2) =
p1D(p1) − C1(D(p1)) if p1 < p2
1
2 p1D(p1) − C1(1
2 D(p1)) if p1 = p2
0 if p1 > p2
Strategic game:
• players: firms
• each firm’s set of actions: set of all possible prices
• each firm’s preferences are represented by its profit
7
8. Example
• 2 firms
• Ci(qi) = cqi for i = 1, 2
• D(p) = α − p.
Nash equilibrium
Best response functions
To find best response function of firm 1, look at its payoff as a
function of its output, given output of firm 2.
8
9. c a
p2
p1
profit
(p1 - c)D(p1)
c ap2
p1
profit
(p1 - c)D(p1)
c ap2
pm
p1
profit
(p1 - c)D(p1)
9
10. p2 < c
c a
p2
p1
profit
(p1 - c)D(p1)
Any price greater than p2 is a best response to p2:
B1(p2) = {p1 : p1 > p2}.
Note: a price between p2 and c is a best response!
p2 = c
Any price greater than or equal to p2 is a best response to p2:
B1(p2) = {p1 : p1 ≥ p2}.
10
11. c < p2 ≤ pm
c ap2
p1
profit
(p1 - c)D(p1)
There is no best response! (a bit less than p2 is almost a best
response).
pm
< p2
c ap2
pm
p1
profit
(p1 - c)D(p1)
pm
is the unique best response to p2:
B1(p2) = {pm
}.
11
13. Nash equilibrium
(p∗
1, p∗
2) such that p∗
1 ∈ B1(p∗
2) and p∗
2 ∈ B2(p∗
1)
I.e. intersection of the graphs of the best response functions
p2
p1pm
pm
c
c
0
So: unique Nash equilibrium, (p∗
1, p∗
2) = (c, c).
13
14. “Direct” argument for Nash equilibrium
If each firm charges the price of c then the other firm can do
no better than charge the price of c also (if it raises its price is
sells no output, while if it lowers its price is makes a loss), so
(c, c) is a Nash equilibrium.
No other pair (p1, p2) is a Nash equilibrium since
• if pi < c then the firm whose price is lowest (or either
firm, if the prices are the same) can increase its profit (to
zero) by raising its price to c
• if pi = c and pj > c then firm i is better off increasing its
price slightly
• if pi ≥ pj > c then firm i can increase its profit by
lowering pi to some price between c and pj (e.g. to
slightly below pj if D(pj) > 0 and to pm
if D(pj) = 0).
Note: to show a pair of actions is not a Nash equilibrium we
need only find a better response for one of the players—not
necessarily the best response.
14
15. Equilibria in Cournot’s and Bertrand’s models generate
different economic outcomes:
• equilibrium price in Bertrand’s model is c
• price associated with an equilibrium of Cournot’s model is
1
3 (α + 2c), which exceeds c since α > c.
Does one model capture firms’ strategic reasoning better than
the other?
Bertrand’s model: firm changes its behavior if it can increase
its profit by changing its price, on the assumption that the
other firm will not change its price but the other firm’s output
will adjust to clear the market.
Cournot’s model: firm changes its behavior if it can increase
its profit by changing its output, on the assumption that the
output of the other firm will not change but the price will
adjust to clear the market.
If prices can easily be changed, Cournot’s model may thus
better capture firms’ strategic reasoning.
15
16. Hotelling’s model of electoral competition
• Several candidates vie for political office
• Each candidate chooses a policy position
• Each citizen, who has preferences over policy positions,
votes for one of the candidates
• Candidate who obtains the most votes wins.
Strategic game:
• Players: candidates
• Set of actions of each candidate: set of possible positions
• Each candidate gets the votes of all citizens who prefer her
position to the other candidates’ positions; each candidate
prefers to win than to tie than to lose.
Note: Citizens are not players in this game.
16
17. Example
• Two candidates
• Set of possible positions is a (one-dimensional) interval.
• Each voter has a single favorite position, on each side of
which her distaste for other positions increases equally.
x*x y
• Unique median favorite position m among the voters: the
favorite positions of half of the voters are at most m, and
the favorite positions of the other half of the voters are at
least m.
Note: m may not be in the center of the policy space.
17
18. Positions and votes
Candidate who gets most votes wins.
x1
(x1 + x2)/2
x2m
vote for 1 vote for 2
In this case, candidate 1 wins.
Best responses
Best response of candidate i to xj:
• xj < m:
xj m
any position for i in here wins
candidate i wins if xi > xj and 1
2 (xi + xj) < m, or in
other words xj < xi < 2m − xj. Otherwise she either ties
or loses. Thus every position between xj and 2m − xj is a
best response of candidate i to xj.
• xj > m: symmetrically, every position between 2m − xj
and xj is a best response of candidate i to xj.
• xj = m: if candidate i choose xi = m she ties for first
place; if she chooses any other position she loses. Thus m
is the unique best response of candidate i to xj.
18
19. Summary
Candidate i’s best response function:
Bi(xj) =
{xi : xj < xi < 2m − xj} if xj < m
{m} if xj = m
{xi : 2m − xj < xi < xj} if xj > m.
x1
x2
0 m
m
19
20. Nash equilibrium
x1
x2
0 m
m
Unique Nash equilibrium, in which both candidates choose the
position m.
Outcome of election is tie.
Competition between the candidates to secure a majority of
the votes drives them to select the same position.
20
21. Direct argument for Nash equilibrium
(m, m) is an equilibrium: if either candidate chooses a
different position she loses.
No other pair of positions is a Nash equilibrium:
• if one candidate loses then she can do better by moving to
m (where she either wins outright or ties for first place)
• if the candidates tie (because their positions are either the
same or symmetric about m), then either candidate can
do better by moving to m, where she wins outright.
21
22. The War of Attrition
• Two parties involved in a costly dispute
• E.g. two animals fighting over prey
• Each animal chooses time at which it intends to give up
• Once an animal has given up, the other obtains all the prey
• If both animals give up at the same time then they split
the prey equally.
• Fighting is costly: each animal prefers as short a fight as
possible.
Also a model of bargaining between humans.
Let time be a continuous variable that starts at 0 and runs
indefinitely.
Assume value to party i of object in dispute is vi > 0; value of
half of object is vi/2.
Each unit of time that passes before one of parties concedes
costs each party one unit of payoff.
22
23. Strategic game
• players: the two parties
• each player’s set of actions is [0, ∞) (set of possible
concession times)
• player i’s preferences are represented by payoff function
ui(t1, t2) =
−ti if ti < tj
1
2 vi − ti if ti = tj
vi − tj if ti > tj,
where j is the other player.
23
25. Best responses
Suppose player j concedes at time tj:
Intuitively: if tj is small then optimal for player i to wait until
after tj; if tj is large then player i should concede immediately.
Precisely: if tj < vi:
tj
tivi
so any time after tj is a best response to tj
25
26. If tj = vi:
tj
tivi
so conceding at 0 or at any time after tj is a best response to
tj
If tj > vi:
tj
ti
vi
so best time for player i to concede is 0.
26
27. So player i’s best response function:
Bi(tj) =
{ti : ti > tj} if tj < vi
{0} ∪ {ti : ti > tj} if tj = vi
{0} if tj > vi.
Best response function of player 1:
t2
t1
v1
0
27
28. Nash equilibrium
t2
t1
v1
v20
Nash equilibria: (t1, t2) such that either
t1 = 0 and t2 ≥ v1
or
t2 = 0 and t1 ≥ v2.
That is: either player 1 concedes immediately and player 2
concedes at the earliest at time v1, or player 2 concedes
immediately and player 1 concedes at the earliest at time v2.
28
29. Note: in no equilibrium is there any fight
Note: there is an equilibrium in which either player concedes
first, regardless of the sizes of the valuations.
Note: equilibria are asymmetric, even when v1 = v2, in which
case the game is symmetric.
E.g. could be a stable social norm that the current owner of the
object concedes immediately; or that the challenger does so.
Single population case: only symmetric equilibria are relevant,
and there are none!
29
30. Auctions
Common type of auction:
• people sequentially bid for an object
• each bid must be greater than previous one
• when no one wishes to submit a bid higher than current
one, person making current bid obtains object at price she
bid.
Assume everyone is certain about her valuation of the object
before bidding begins, so that she can learn nothing during the
bidding.
Model
• each person decides, before auction begins, maximum
amount she is willing to bid
• person who bids most wins
• person who wins pays the second highest bid.
Idea: in a dynamic auction, a person wins if she continues
bidding after everyone has stopped—in which case she pays a
price slightly higher than the price bid by the last person to
drop out.
30
31. Strategic game:
• players: bidders
• set of actions of each player: set of possible bids
(nonnegative numbers)
• preferences of player i: represented by a payoff function
that gives player i vi − p if she wins (where vi is her
valuation and p is the second-highest bid) and 0 otherwise.
This is a sealed-bid second-price auction.
How to break ties in bids?
Simple (but arbitrary) rule: number players 1, . . . , n and make
the winner the player with the lowest number among those
that submit the highest bid.
Assume that v1 > v2 > · · · > vn.
31
32. Nash equilibria of second-price sealed-bid
auction
One Nash equilibrium
(b1, . . . , bn) = (v1, . . . , vn)
Outcome: player 1 obtains the object at price v2; her payoff is
v1 − v2 and every other player’s payoff is zero.
Reason:
• Player 1:
• if she changes her bid to some x ≥ b2 the outcome
does not change (remember she pays the second
highest bid)
• if she lowers her bid below b2 she loses and gets a
payoff of 0 (instead of v1 − b2 > 0).
• Players 2, . . . , n:
• if she lowers her bid she still loses
• if she raises her bid to x ≤ b1 she still loses
• if she raises her bid above b1 she wins, but gets a
payoff vi − v1 < 0.
32
33. Another Nash equilibrium
(v1, 0, . . . , 0) is also a Nash equilibrium:
Outcome: player 1 obtains the object at price 0; her payoff is
v1 and every other player’s payoff is zero.
Reason:
• Player 1:
• any change in her bid has no effect on the outcome
• Players 2, . . . , n:
• if she raises her bid to x ≤ v1 she still loses
• if she raises her bid above v1 she wins, but gets a
negative payoff vi − v1.
33
34. Another Nash equilibrium
(v2, v1, 0, . . . , 0) is also a Nash equilibrium:
Outcome: player 2 gets object at price v2; all payoffs 0.
Reason:
• Player 1:
• if she raises her bid to x < v1 she still loses
• if she raises her bid to x ≥ v1 she wins, and gets a
payoff of 0
• Player 2
• if she raises her bid or lowers it to x > v2, outcome
remains same
• if she lowers her bid to x ≤ v2 she loses and gets 0
• Players 3, . . . , n:
• if she raises her bid to x ≤ v1 she still loses
• if she raises her bid above v1 she wins, but gets a
negative payoff vi − v1.
Player 2’s may seem “risky”—but isn’t if the other players
adhere to their equilibrium actions.
Nash equilibrium requires only that each player’s action be
optimal, given the other players’ actions.
In a dynamic setting, player 2’s bid isn’t credible (why would
she keep bidding above v2?) [Will study this issue later.]
34
35. Distinguishing between equilibria
For each player i the action vi weakly dominates all her other
actions
That is: player i can do no better than bid vi no matter what
the other players bid.
Argument:
• If the highest of the other players’ bids is at least vi, then
• if player i bids vi her payoff is 0
• if player i bids x = vi her payoff is either zero or
negative.
• If the highest of the other players’ bids is b < vi, then
• if player i bids vi her payoff is vi − b (she obtains the
object at the price b)
• if player i submits some other bid then she either
obtains the good and gets the same payoff, or does not
obtain the good and gets the payoff of zero.
Summary
Second-price auction has many Nash equilibria, but the
equilibrium (b1, . . . , bn) = (v1, . . . , vn) is the only one in which
every players’ action weakly dominates all her other actions.
35
36. First-price auction
Another auction form:
• auctioneer begins by announcing a high price
• price is gradually lowerered until someone indicates a
willingness to buy the object at that price.
Model
Strategic game:
• players: bidders
• actions of each player: set of possible bids (nonnegative
numbers)
• preferences of player i: represented by a payoff function
that gives player i vi − p if she wins (where vi is her
valuation and p is her bid) and 0 otherwise.
This is a first-price sealed-bid auction.
One Nash equilibrium
(v2, v2, v3, . . . , vn)
Outcome: player 1 obtains the object at the price v2.
Why is this a Nash equilibrium?
36
37. Property of all equilibria
In all equilibria the object is obtained by the player who values
it most highly (player 1)
Argument:
• If player i = 1 obtains the object then we must have
bi > b1.
• But there is no equilibrium in which bi > b1:
• if bi > v2 then i’s payoff is negative, so she can do
better by reducing her bid to 0
• if bi ≤ v2 then player 1 can increase her payoff from 0
to v1 − bi by bidding bi.
Another equilibrium
(v1, v1, v3, . . . , vn)
Outcome: player 1 obtains the object at the price v1.
As before, player 2’s action may seem “risky”: if there is any
chance that player 1 submits a bid less than v1 then there is a
chance that player 2’s payoff is negative.
37
38. Domination
As in a second-price auction, any player i’s action of bidding
bi > vi is weakly dominated by the action of bidding vi:
• if the other players’ bids are such that player i loses when
she bids bi, then it makes no difference to her whether she
bids bi or vi
• if the other players’ bids are such that player i wins when
she bids bi, then she gets a negative payoff bidding bi and
a payoff of 0 when she bids vi.
However, in a first-price auction, unlike a second-price auction,
a bid by a player less than her valuation is not weakly
dominated.
Reason: if player i bids vi < vi and the highest bid of the
other players is < vi, then player i is better off than she is if
she bids vi.
Revenue equivalence
The price at which the object is sold, and hence the
auctioneer’s revenue, is the same in the equilibrium
(v1, . . . , vn) of the second-price auction as it is in the
equilibrium (v2, v2, v3, . . . , vn) of the first-price auction.
38