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Hint: Check out the Khan academy video on computing compound interest; hopefully that sets you in the right direction.


In this case, $q_0$ is all of the "outside" goods, that is, the more it is consumed, the higher the utility will be. This is because the utility function is monotonically increasing in $q_0$, which suggests that the budget constraint should be \begin{equation} q_0 + p_1 q_1 + p_2 q_2 \le Y \end{equation} for budget level of $Y$, and prices of $p_1$ and ...


An equilibrium will be one where everyone bids 11.11% more than their valuation. That is, a bidder with private valuation $p$ reports $p/0.9$. Everyone is bidding more than private valuation, but the information revealed is same as in a regular 2nd-price auction.

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