Question

Consider an auctioneer who is selling an item through an auction. It is known that the 25 risk-neutral bidders have affiliated values that are distributed between $0 and $500 million. Based on this information, the auction type that will maximize expected revenue is:____.

1. English auction.
2. second-price, sealed-bid auction.
3. first-price, sealed-bid auction and Dutch auction.
4. English auction and second-price, seal-bid auction.

Answer 1

2. second-price, sealed-bid auction.

Step-by-step explanation:

In the given situation, it is mentioned that there is 25 risk -neutral bidders that contains the affiliated values and the same is to be allocated between $0 and $500 million

So, here the type of an action that could maximize the expected revenue is the second price i.e. sealed bid auction as in this the bidder provides the maximum price that received the good in the second maximum price

Therefore, the second option is correct