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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Question
Chapter 15A, Problem 9E
To determine
To describe:The auction design is more like private placement of corporate newly issued bonds and IPO stock.
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hello so i got a question from my teacher and wanna make sure its correct
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A company is considering the strategy to further expand its activity into a foreign market it recently accessed. The foreign government has announced that a new industrial site will be offered for sale on a competitive tender basis, the site going to the company making the highest bid. The multinational has a good experience with this type of auctions, and – based on its assessment – it decides that if it is to bid for the site, it will place a bid of £750 million. In the past, 70 percent of the company’s bids for such type of projects have been successful.
The marketing department indicates that expansions of the multinational’s foreign market activity can be expected to generate revenue of around £1,500 million if demand turns out to be high, versus only £500 million if demand turns out to be low. Data scientists have indicated that the probability of high demand is 0.60.
If the company is…
There are 3 bidders with valuations that are independently and uniformly distributed between 0 and 1.
In equilibrium, what will Bidder 1 bid in a first-price auction if its valuation is 0.7? Round your answer to
two decimal places.
Explain how the strategic choice of reservation price can raise expected profitability yet threaten efficiency in an English auction.
Chapter 15A Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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- How to solve this question? Consider an antique auction where bidders have independent private values. There are two bidders, each of whom perceives that valuations are uniformly distributed between $100 and $1,000. One of the bidders is Sue, who knows her own valuation is $200. What is Sue's optimal bidding strategy in a Dutch auction?arrow_forwardSuppose that Alpha Inc., Richardson Industries, and K-Tek are the only three firms interested in a plot of land on the outskirts of town. The lot is being auctioned by a second-price sealed-bid auction. Alpha values the lot at $17,000, Richardson at $20,000, and K-Tek at $10,000. Each bidding firm's consumer surplus is CS=v₁ - P if it wins the auction and 0 if it loses. The values are private. What is each bidder's optimal bid? Who wins the auction, and what price does that firm pay? Richardson's optimal bid is $ and K-Tek's is $ Alpha's optimal bid is $ whole numbers.) (Enter your responses asarrow_forwarda. Consider the game faced by the British and Dutch managers when both are given contracts that compensate them with (1)/(2) of 1% of revenue. The strategic form game is shown. Find the Nash equilibria. b. Now consider the game between the British and Dutch shareholders as to what kind of contracts to give their managers. Assume that they simultaneously choose between a contract that gives the manager 1% of profit and one that gives him (1)/(2) of 1% of revenue. Assume, as before, that the shareholders’ payoff is profit (and we ignore the trivial amount that they pay to their managers). After a pair of contracts is selected, the two contracts are revealed to both managers, and the managers then choose between supply levels of low, moderate, and high. Find all SPNE.arrow_forward
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