Ec310I assignment 1
.pdf
School
Wilfrid Laurier University**We aren't endorsed by this school
Course
EC 310L
Subject
Economics
Date
Dec 16, 2024
Pages
6
Uploaded by CorporalElement15841
CHIMDINDU JAMES UDUJI EC310I ASSIGNMENT 1 210501700 OCT 2 2024
1.(a.) Strategy-proofness makes sure that participants in an auction cannot benefit from manipulating the system by lying about their preferences or strategies. The best strategy is always to be truthful. In market design, ensuring strategy -proofness is crucial because it prevents gaming the system, leading to more efficient and fair outcomes. (b.) Price discovery is the process where the market determines the price of a product based on supply, demand, and further information. Its relevance to market design is efficient price discovery is key to accurate resource allocation as seen in auctions. Properly designed markets ensure prices reflect true value, minimizing volatility and inefficiency. 2.Example for k=2: there are three bidders: 1, 2, and 3. -Bidder 1: $100-Bidder 2: $80-Bidder 3: $60What happens if 1or 2 tries to bid differently? •If 1bids less than $100, say $70, they might lose the auction because 2’s bid of $80 is higher. 1would miss out on winning, and their utility would be zero. •If 1bids more than $100, it doesn’t help because the price they pay is still determined by 3’sbid (the 3rd highest), which stays at $60. So, bidding more doesn’t increase their utility either.
3.