If you have any questions that aren't addressed here, post a thread in the forum.

Question 1

  • For part (d), you should calculate your optimum bid as if the auction outlined in part (b) were instead administered as a second-price auction, and then calculate how that new bid compares to the bid you originally calculated in part (c). That is, compare your new bid under the second-price setup in part (d), to your bid from the first-price setup with the new rival outlined in part (c).
    • You do not need to calculate a new optimal bid for a second-price auction with the new rival from part (c).

Question 3

  • For part (b), alpha reflects the probability of getting caught in each month. You need not calculate the probability of getting caught over some longer period (e.g. a year).