Asked by
Graisy Greener
on Oct 14, 2024
Verified
A dealer decides to sell an antique automobile by means of an English auction with a reservation price of $600.There are two bidders.The dealer believes that there are only three possible values that each bidder's willingness to pay might take, $6,400, $3,000, and $600.Each bidder has a probability of 1/3 of having each of these willingnesses to pay, and the probabilities of the two bidders are independent of the other's valuation.Assuming that the two bidders bid rationally and do not collude, the dealer's expected revenue from selling the automobile is
A) $2,500.
B) $4,700.
C) $3,333.33.
D) $3,000.
E) $6,400.
Reservation Price
The maximum or minimum price at which a person is willing to buy or sell a good or service.
English Auction
A bidding process where participants openly bid against each other, and the item is sold to the highest bidder.
Willingness To Pay
The maximum amount an individual or organization is prepared to spend to acquire a good, service, or avoid something undesirable.
- Achieve a thorough comprehension of the principle and the working system of English auctions.
- Scrutinize the expected proceeds from auctions adjusted by varying threshold prices.
- Grasp the significance of reservation prices in determining auction results.
Verified Answer
YM
Learning Objectives
- Achieve a thorough comprehension of the principle and the working system of English auctions.
- Scrutinize the expected proceeds from auctions adjusted by varying threshold prices.
- Grasp the significance of reservation prices in determining auction results.