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Nt1310 Unit 1 Exercise 2

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Question 1
The first step for the simulation before moving onto the K=100 is to simulate the auction for one whole season with different strategies. From there we are able to utilize a data table function where it will simulate the expected surplus and expected revenue for the K=100 sample size. Please refer to Appendix A - Table 1-1.1 for screenshots of the tables obtained for N=3 bidders. The extensive data table is calculated for one individual’s expected surplus B1(x).

Our simulation is randomized as it relies on the personal valuation each bidder gives, which is found via the =rand() formula. For question one, the optimal bidding strategy to obtain high surplus is based on obtaining the average of expected surplus in each bidding strategy column. In other words, the question is focused on finding …show more content…
It is crucial to match the =MAX() amount to a bidding strategy. Both =MATCH(max(), expected _surplus or revenue, 0) and =Index(strategies, match()) locate the optimal strategy for bidding or revenue. However, the expected surpluses and expected revenues were graphed independently, which will give individuals the same result with visuals. Refer to Appendix A - Figure 1 for N=3 graph. In this instance, the bidding strategy that produced the most utility was 0.30 where the revenue was 0.46. Therefore, the bidder should utilize a 0.30 strategy to ensure they obtain the highest amount of surplus. Under N=3 bidders, the optimal strategy being 0.3 is very intriguing because it means that your bidding strategy should be 33.3% of your valuation (vi), which is equivalent to the strategy the other bidders are using with the (1-1/N) formula. Consequently, the bid is dependent on how many bidders there are in the auction, and one should not bid less than a percentage than that of

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