http://www.jstor.org/discover/10.2307/2977633?uid=4&uid=2

For each paper, you are provided with a list of questions. The first question specifies which parts of the paper you are expected to read, and asks for a general summary. I imagine that an adequate summary will take approximately one half to one full typed, single-spaced page of text1 . In addition to summarizing the reading in your own words, you should answer each of the other questions – depending on the question, a complete answer may take a sentence or a full paragraph. If you feel unsure about whether you understand a question or whether your answers are complete, you should feel free to talk to me about it.

http://www.jstor.org/discover/10.2307/2977633?uid=4&uid=2

“Counterspeculation, Auctions, and Competitive Sealed Tenders” William Vickrey, Journal of Finance, Volume 16, Issue 1 (March 1961), 8-37.

(a) Read the introduction, Sections II (only pages 14-17) and III, and the Conclusion. Summarize the main points of each of these sections.

(b) What was the motivating idea that inspired Vickrey’s study of auctions?

(c) The terminology in this paper is somewhat different from the terminology we have used in class. Identify the terms that we have used in class that are equivalent to the following terms from the paper: • Ordinary or progressive auction • Homogeneous rectangular case

(d) Explain the meaning of the statement that the outcome of the ordinary or progressive auction is “Pareto Optimal”. Will the outcome of the Dutch auction also be Pareto Optimal (http://www.gametheory.net/dictionary/ParetoOptimal.html) ? Why or why not?

(e) List the assumptions made in the analysis of “the Dutch auction game.” What elements are ruled out from the start?

(f) Quote the sentences in the article in which Vickrey proposes a “new” type of sealed bid auction (the rules that economists would later call the Vickrey auction). In the discussion that follows his proposal, what are the advantages, possible problems, and proposed solutions, of using this type of auction?