Asked by Jacob Brockway on Sep 24, 2024
Verified
In common value auctions
A) Every bidder know the value of the object being sold
B) Each bidder makes the same estimate of the value of the good
C) Bidders do not know the estimates of the others
D) The true value of the item differs across bidders
Common Value Auctions
Auctions in which the item for sale has a value that is the same for all bidders, but the bidders have different information about that value.
True Value
The accurate, fair, or intrinsic worth or importance of something.
Bidders
Individuals or entities that offer a price for goods, services, or assets in an auction or tender process.
- Learn the fundamentals of common value auctions and their variance from private value auctions.
Verified Answer
KV
Kristina Vrazha5 days ago
Final Answer :
C
Explanation :
In common value auctions, while the true value of the item is the same for everyone, bidders do not have perfect information about this value and must make their own estimates. They do not know the estimates of other bidders, which can lead to the winner's curse where the winner ends up overpaying based on an overestimate of the item's value.
Learning Objectives
- Learn the fundamentals of common value auctions and their variance from private value auctions.