Chapter 15 discusses the relationship between the VCG principle and second-price auctions. In…

Chapter 15 discusses the relationship between the VCG principle and second-price auctions. In particular, we saw that the VCG principle is a generalization of the idea behind second-price auctions to a setting in which there is more than one object being sold. In this problem we explore this relationship in an example. Suppose that a seller has one item, which we call item x. There are three buyers, whom we call a, b, and c. The values that these buyers (a, b, and c) have for the item are 6, 3, and 1, respectively.

(a) Suppose that the seller runs a second-price auction for the item. Which buyer will win the auction and how much will this buyer pay?

(b) Now let’s suppose that the seller uses the VCG mechanism to allocate the item. Remember that the first step in the running the VCG mechanism when there are more buyers than items is to create fictional items, which each buyer values at 0, so that the number of items to be allocated is the same as the number of bidders. Let’s call these additional (fictional) items y and z. Find the allocation that results from running the VCG mechanism. What are the prices charged to each buyer for the item that they receive? Explain why the price that buyer a pays is the harm that he causes to the remaining bidders by taking the item he is assigned.

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more
error: Content is protected !!