The Optimal Seller
Two bidders have independent private values, each exponentially distributed with mean 1 (density e^(−v) for v ≥ 0). The seller values the item at 0 and uses a revenue-maximising auction (for example a second-price auction with the optimal reserve price). Bidders are risk neutral and bid optimally. What is the seller's expected revenue? Give an exact expression; a decimal accurate to three places is also accepted.
Related problems & prerequisites
Worth solving first
- The Gap Between the Top Two 5.0/10
- Values That Lean High 4.0/10
Source: Application of Roger Myerson's optimal auction design (1981). Statement written for AxiomIQ.