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 3MC
To determine
Winning bid.
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10
Use the expected value information to illustrate how having more bidders in an oral auction will likely result in a higher winning bid.
Which of the following gambles is “unfair”?
a.
A game that promises to pay you $1 if a coin comes up head and cost you $1 if a coin comes up tail, with no entry fee.
b.
A game that promises to pay you $10 if a coin comes up head and cost you $1 if a coin comes up tail, with no entry fee.
c.
A game that promises to pay you $10 if a coin comes up head and cost you $1 if a coin comes up tail, with an entry fee of $4.50 for the right to play.
d.
All of the above.
Explain why a player in a sealed-bid, second-price auction would never submit a bid that exceeds his or her true value of the object being sold. (Hint: What if all players submitted bids greater than their valuations of the object?)
Chapter 18 Solutions
Managerial Economics: A Problem Solving Approach
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