Best I can get is it equal for one. Am I crazy or is it impossible to get them both better?

 

 

From prof: (Hard, until you see what’s going on, then it’s easy).  Two people go to an auction.  It’s a sealed-bid auction, meaning that they put their bids in an envelope, the higher bidder gets the prize and pays the amount bid, and the other gets nothing and pays nothing.  Ties are broken with a coin flip. 

 

In this case, player A values the object at $60 and player B values it at $70.  Each brings $100 to the auction.   Player A bids $55 and player B, overconfidently, bids $40.  So player A wins the object even though A wanted it less than B.  Player A goes home with the object and $45, and B goes home with $100.  Show that outcome not Pareto-efficient.  That is, first calculate A’s and B’s net benefit from the auction as it happened, and  then give another possible outcome of the auction that is better for both

AccountingQueen

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Status NEW Posted 30 Aug 2017 03:08 PM My Price 5.00

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