Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 6, Problem 8IAPA
To determine
To state:
The way Dutch flower auction can influence
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Omar's Fruit Shop sells only apples and bananas. Each week, Omar puts either apples or bananas on sale. He is trying to figure out which fruit he should put on sale this week.
Omar gets all of his business from people who walk by his fruit shop and stop in. He performs some market research and asks 800 different people if they would purchase apples, bananas, or no fruit if they walked by and apples were on sale. He does the same for bananas being on sale.
This week a total of 400 people will walk by Omar's Fruit Shop.
The following table shows the profit for each type of fruit depending on which fruit Omar puts on sale:
Apples on sale Bananas on sale
Profit from apples $0.25 $0.40
Profit from bananas $0.45 $0.30
The following table shows the results from his market research.
Customer choice Apples on sale Bananas on sale
Apples 604 92
Bananas 90 620
No fruit 106 88
Total 800 800
What is Omar's expected profit if he puts apples on sale?
What is Omar's…
Styles
In an auction, potential buyers compete for a good by submitting bids. Adam Gallinsky, a social scientist from
NWU, compared eBay auctions in which the same good was sold. He found on average that, the higher the
number of bidders the higher the sales price. For example, in two separate auctions of identical IPods, the one
with the higher number of bidders brought the higher sales price. According to Gallinsky, this explains why
smart sellers set absurdly low opening prices (the lowest price the seller will accept), such as 1 cent for a new
IPod. Use the concept of consumer and producer surplus to explain this reasoning.
Exercise 4.1 Amy and Bill simultaneously write a bid on a piece of paper. The bid
can only be either 2 or 3. A referee then looks at the bids, announces the amount of
the lowest bid (without revealing who submitted it) and invites Amy to either pass or
double her initial bid.
-
The outcome is determined by comparing Amy's final bid to Bill's bid: if one is
greater than the other then the higher bidder gets the object and pays his/her own bid;
if they are equal then Bill gets the object and pays his bid.
Represent this situation by means of two alternative extensive frames.
Note: (1) when there are simultaneous moves we have a choice as to which player we
select as moving first: the important thing is that the second player does not know what
the first player did;
(2) when representing, by means of information sets, what a player is uncertain about,
we typically assume that a player is smart enough to deduce relevant information, even
if that information is not explicitly given to…
Chapter 6 Solutions
Foundations of Economics (8th Edition)
Ch. 6 - Prob. 1SPPACh. 6 - Prob. 2SPPACh. 6 - Prob. 3SPPACh. 6 - Prob. 4SPPACh. 6 - Prob. 5SPPACh. 6 - Prob. 6SPPACh. 6 - Prob. 7SPPACh. 6 - Prob. 8SPPACh. 6 - Prob. 9SPPACh. 6 - Prob. 10SPPA
Ch. 6 - Prob. 11SPPACh. 6 - Prob. 12SPPACh. 6 - Prob. 1IAPACh. 6 - Prob. 2IAPACh. 6 - Prob. 3IAPACh. 6 - Prob. 4IAPACh. 6 - Prob. 5IAPACh. 6 - Prob. 6IAPACh. 6 - Prob. 7IAPACh. 6 - Prob. 8IAPACh. 6 - Prob. 9IAPACh. 6 - Prob. 1MCQCh. 6 - Prob. 2MCQCh. 6 - Prob. 3MCQCh. 6 - Prob. 4MCQCh. 6 - Prob. 5MCQCh. 6 - Prob. 6MCQCh. 6 - Prob. 7MCQ
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