Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Chapter 15A, Problem 1.4CE
To determine
To Identify: The other factors that could affect the optimal auction design.
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Explain how the strategic choice of reservation price can raise expected profitability yet threaten efficiency in an English auction.
Consider the following situation: five individuals are participating in an auction for an old bicycle used by a famous cyclist. The table below provides the bidders' valuations of the cycle. The auctioneer starts the bid at an offer price far above the bidders' values and lowers the price in increments until one of the bidders accepts the offer.
Bidder
Value ($)
Roberto
750
Claudia
700
Mario
650
Bradley
600
Michelle
550
What is the optimal strategy of each player in this case?
Who will win the auction if each bidder places his or her optimal bid?
If Claudia wins the auction, how much surplus will she earn?
Explain how an auction to sell a consumer-facing banking division might be used to determine the value of the division.
Chapter 15A Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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