HardMarket Making & Games
Shading a First-Price Bid
Jane StreetDE Shaw
Two bidders compete in a sealed-bid first-price auction. Each privately values the item as an independent uniform draw on [0, 1], and the higher bid wins and pays its own bid. In the symmetric equilibrium each bidder bids half their value. Your value is 0.8 — what do you bid?
Approach
Winning at your full value earns you nothing.
With 2 uniform bidders the equilibrium shades to half.
Answer
Show the final answer
The answer is 0.4. Sign in free for the full worked solution and to check your own answer.
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