Suppose there are 2 bidders in an auction. Each bidder i (i = 1, 2) has her own valuation (or willingness-to-pay) for the good, denoted vi
, which are private information.
Since we don’t know the bidders’ valuations, from our point of view, these valuations
are random variables. Suppose the valuations are drawn independently from a uniform
[0, 1] distribution. That is, for i = 1, 2, Vi
iid∼ F(v), where F(v) = v for v in [0, 1].