A seller is deciding upon which auction mechanism to use to sell her house.
The house is worth nothing to her if it is not sold. There are N potential
buyers who are each equally likely to value the house at anything between
0 and $99,000. Assume the bidders are risk-neutral and there is no such
thing as a reserve price!
What two factors do the bidders have to balance in deciding the optimal bid in a Dutch or first-price auction? If the bidders are using
equilibrium strategies then use the lecture notes to determine how long a bidder with valuation u should wait before stopping the clock if the
seller decides to use a Dutch auction?