In general, with a first-price sealed-bid auction with private values, the Nash equilibrium bids will:
A)increase as the number of bidders goes up.
B)decrease as the number of bidders goes up.
C)not be affected by the number of bidders in the auction.
D)decrease at a rate of 1/N where N is the number of bidders in the auction.

Question

Quizplus · Accepted Answer

In a first-price sealed-bid auction with private values, the Nash equilibrium bids tend to increase as the number of bidders increases. This is because each bidder must bid higher to outbid the increased competition from more bidders, while still trying to pay less than their own valuation.

In General, with a First-Price Sealed-Bid Auction with Private Values