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-   -   Auction theory: why no revenue equivalence? (https://www.askmehelpdesk.com/showthread.php?t=747735)

  • May 7, 2013, 03:37 AM
    h1952
    auction theory: why no revenue equivalence?
    Auction: n bidders, with values drawn from uniform on a,b (not from (0, c)) .
    Show revenue equivalence of first price and second price.

    what I have: second price: optimal strategy Bid = Value. Second highest bid from n draws on a uniform (a,b) = a + (b-a) (n+1 - 2)/(n+1) (k = 2).
    = a + (b-a) (n-1)/(n+1)


    First price: optimal strategy B = (n-1/n)V. First highest from n draws on a uniform ((n-1)/n * a , (n-1)/n * b) = (a*, b*) = a* + (b*-a*) (n+1-1)/(n+1) = (n-1)/n a + ((n-1)/n) (a+ (b-a) n / n+1 = a - a/n + (b-a) (n-1)/(n+1).

    These are not the same because a/n is not zero. What am I doing wrong here?

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