, ranging from art to skyscrapers. This suggests that bidders value the steel independently, although it is perceived that bidder valuations are evenly distributed between $7,000 and $23,000.   You are the purchasing manager at CPT and are bidding on three tons of six-inch hot-rolled channel steel against 5 other bidders. Your company values the three tons of channel steel at $12,000. What is your optimal bid?

Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter16: Bargaining
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CPT Inc. is a local manufacturer of conveyor systems. Last year, CPT sold over $2 million worth of conveyor systems that netted the company $100,000 in profits. Raw materials and labor are CPT’s biggest expenses. Spending on structural steel alone amounted to over $500,000, or 25 percent of total sales. In an effort to reduce costs, CPT now uses an online procurement procedure that is best described as a first-price, sealed-bid auction. The bidders in these auctions utilize the steel for a wide variety of purposes, ranging from art to skyscrapers. This suggests that bidders value the steel independently, although it is perceived that bidder valuations are evenly distributed between $7,000 and $23,000.

 

You are the purchasing manager at CPT and are bidding on three tons of six-inch hot-rolled channel steel against 5 other bidders. Your company values the three tons of channel steel at $12,000. What is your optimal bid?

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