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The optimal bidding strategy for an oral auction is: a) To shade your bid below your true value and drop out well before it is reached, b) To shade your bid below your true value and drop out just when the shaded amount is reached, c) To drop out when the bidding exceeds your true value, d) To size up your competition to determine how much to shade your bid
The optimal bidding strategy for an oral auction is:
a) To shade your bid below your true value and drop out well before it is reached,
b) To shade your bid below your true value and drop out just when the shaded amount is reached,
c) To drop out when the bidding exceeds your true value,
d) To size up your competition to determine how much to shade your bid.
Expert Solution
The correct answer is b) To shade your bid below your true value and drop out just when the shaded amount is reached
This is because the oral auction includes bidding the value of asset for the highest value. The oral bidding includes many individuals that estimate the value of asset accordingly. The bidding of an asset starts from the lower value and each individual provides its own value. The highest estimated value of the asset is finalizes as the auction value.
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