Final answer:
The steady-state bid of a classifier is achieved when the net gains from activation balance out the costs from the coefficient fees. This is calculated by subtracting the bid and tax coefficients from the point received upon each activation.
Step-by-step explanation:
The question involves calculating the steady-state bid of a classifier in an economic model. The classifier is rewarded with a point upon each activation and incurs costs from a bid coefficient and a tax coefficient. With a bid coefficient Cbid = 0.05 and a tax coefficient Ctax = 0.01, each activation of the classifier would result in a net gain of 1 - Cbid - Ctax per activation. As the classifier is activated repeatedly, it will accumulate these net gains.
For Cbid = 0.05, each activation yields a net gain of 1 - 0.05 - 0.01 = 0.94 points. If you continue to activate the classifier, it will gradually accumulate points where additional activations no longer increase the bid significantly. This steady state is reached when the gains from each activation are balanced by the deductions from the coefficient costs.
The calculation will vary with different bid coefficients. For Cbid = 0.01, each activation's net gain is 1 - 0.01 - 0.01 = 0.98. For Cbid = 0.1, the net gain per activation is 1 - 0.1 - 0.01 = 0.89. You can apply the same logic as above to find the steady-state for different Cbid values.