Michael S. answered • 09/01/19

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Auction theory typically (always?) begins by assuming that each bidder's valuation is a random variable. Now, it might seem reasonable (at least from a Bayesian perspective) for you to treat **other** people's valuations as random variables. After all, you don't know their valuations! However, what justification can there be for treating your **own** valuation as a random variable when deciding on how to bid? And are there any approaches which do not begin with this assumption?**Edit:** Here's another way of posing the question. In the context of auction theory, people normally seem to define a strategy as a **function** mapping from my (random) valuation to my bid. But assuming that I know my valuation, why not simply define my strategy as my bid?

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Michael S. answered • 09/01/19

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4.6
(157)
PhD in economics with teaching experience

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