Assignment 4: Auctions

AdSense has moved from second-price to a first-price sealed bid auction. Your objective will be to develop a program that computes optimal bids for purchasing website advertising space under the new rules.

When ad space is to be auctioned, N people are selected to participate. Every participant submits a sealed bit. The highest bid wins the space.

You know your own value for the space and how many people will participate in the auction. While you do not know the values of the other bidders, you have the historical records of prices from before the switch to first-price rules. You will need to reconstruct the distribution from the historical data. Assume that private values are independent and symmetrically distributed according to a normal distribution.