9. A dealer decides to sell an antique automobile by means of an English auction with a reservation price of $2,700. There are two bidders. The dealer believes that there are only three possible values, $5,400, $3,600, and $2,700, that each bidder's willingness to pay might take. Each bidder has a probability of 1/3 of having each of these willingness to pay, and the probabilities for each of the two bidders are independent of the other's valuation. Assuming that the two bidders bid rationally and do not collude, the dealer's expected revenue from selling the car is approximately а. $4,500. b. $3,900. с. $3,600. d. $3,300. CE 400

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Chapter1: Making Economics Decisions
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please clear explain why choose D

9.
A dealer decides to sell an antique automobile by means of an English auction with a
reservation price of $2,700. There are two bidders. The dealer believes that there are only three
possible values, $5,400, $3,600, and $2,700, that each bidder's willingness to pay might take. Each
bidder has a probability of 1/3 of having each of these willingness to pay, and the probabilities for each
of the two bidders are independent of the other's valuation. Assuming that the two bidders bid
rationally and do not collude, the dealer's expected revenue from selling the car is approximately
a.
$4,500.
b.
$3,900.
C.
$3,600.
d.
$3,300.
е.
$5,400.
ANS: D
Transcribed Image Text:9. A dealer decides to sell an antique automobile by means of an English auction with a reservation price of $2,700. There are two bidders. The dealer believes that there are only three possible values, $5,400, $3,600, and $2,700, that each bidder's willingness to pay might take. Each bidder has a probability of 1/3 of having each of these willingness to pay, and the probabilities for each of the two bidders are independent of the other's valuation. Assuming that the two bidders bid rationally and do not collude, the dealer's expected revenue from selling the car is approximately a. $4,500. b. $3,900. C. $3,600. d. $3,300. е. $5,400. ANS: D
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