Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 18, Problem 18.5IP
To determine
The reason why the bidders who have no chances to win will attend an auction.
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Chapter 18 Solutions
Managerial Economics: A Problem Solving Approach
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- “While auctions are appealing in theory, the challenges of auction design in practice are insurmountable” discussarrow_forwardTrue or false , justify your answerarrow_forwardCharter schools in Florida use a lottery to determine which students get in. This means that__________________________________. An auction in this case would mean that: There is often a shortage of seats at charter schools; the families who place the highest value on charter school education would be more likely to get a spot. Families who would like to pay for the right to get into charter schools do not have the opportunity to act on that desire; the price of a seat would rise from zero to some price above zero. Florida charter schools are not maximizing revenue from this system; Florida charter schools would earn greater revenue over time. An auction would create an efficient outcome in the market for charter school seats; An arguably “unfair” market outcome could take place. All of the above.arrow_forward
- One method of solving this problem is through signaling. Signaling is a strategy one uses when they have information. The goal is to use a signal to convince the buyer that the good or service that is being sold is quality and will meet the buyer's wants. Offer an example of a company that uses a signal to help sell its product. What is the signal? What information is the signal trying to convey? Do you think the signal is effective? Why or why not? Does this signal improve market efficiency? Why or why not?arrow_forwardThe Dean of a College is looking for a tenured professor to teach in the Core Curriculum. Monetary incentives are needed to get someone interested, but how much? The Dean decides to use an auction to do the job. Two professors, equally qualified, applied for the position. The two professors are invited to covertly submit their bids to the Dean. The Dean will give the position to the professor who submits the lower bid (if there is a tie, the job is assigned randomly). The professor who gets the job will be paid his/her own bid. Each professorís reservation value for teaching the course is his/her private information. It is common knowledge that their reservation values are independently and uniformly distributed over [0;100]: So if a professor with a reservation value of 60 wins with a bid of 50, his payoff is 60- 50 = 10: (A) Find a Bayesian Nash equilibrium of the bidding game.(B) Suppose the two professorsíreservation values are 60 and 70, respectively. What are their bids in the…arrow_forwardThe Dean of Columbia College is looking for a tenured professor to teach in the Core Curriculum. Monetary incentives are needed to get someone interested, but how much? The Dean decides to use an auction to do the job. Two professors, equally qualified, applied for the position. The two professors are invited to covertly submit their bids to the Dean. The Dean will give the position to the professor who submits the lower bid (if there is a tie, the job is assigned randomly). The professor who gets the job will be paid his/her own bid. Each professors reservation value for teaching the course is his/her private information. It is common knowledge that their reservation values are independently and uniformly distributed over [0; 100]: So if a professor with a reservation value of 60 wins with a bid of 50, his payoff is 60 50 = 10: (a) Find a Bayesian Nash equilibrium of the bidding game. (b) Suppose the two professorsíreservation values are 60 and 70, respec- tively. What are…arrow_forward
- Why is market definition important for economic decision making?arrow_forwardIn bargaining without impatience, What is the discount factor?arrow_forwardFour neighbors, each with a vegetable garden, agree to share their produce. One will grow beans (B), one will grow lettuce (L), one will grow tomatoes (T), and one will grow zucchini (Z). Table shows what fraction of each crop each neighbor will receive. What prices should the neighbors charge for their crops if each person is to break even and the lowest-priced crop has a value of $50?arrow_forward
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