£900. There are two bidders. The dealer believes that there are only three possible values, £7,200, £3,600, and £900, that each bidder’s willingness to pay might take. Each bidder has a probability of 1/3 of having each of these willingnesses to pay, and the probabilities for each of the two bidders are independent of the other’s 4 valuation. Assuming that the two bidders bid rationally and do not collude, the dealer’s expected revenue from selling the car is at least
£900. There are two bidders. The dealer believes that there are only three possible values, £7,200, £3,600, and £900, that each bidder’s willingness to pay might take. Each bidder has a probability of 1/3 of having each of these willingnesses to pay, and the probabilities for each of the two bidders are independent of the other’s 4 valuation. Assuming that the two bidders bid rationally and do not collude, the dealer’s expected revenue from selling the car is at least
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A dealer decides to sell an antique automobile by means of an English auction with a reservation price of £900. There are two bidders. The dealer believes that there are only three possible values, £7,200, £3,600, and £900, that each bidder’s willingness to pay might take. Each bidder has a probability of 1/3 of having each of these willingnesses to pay, and the probabilities for each of the two bidders are independent of the other’s 4 valuation. Assuming that the two bidders bid rationally and do not collude, the dealer’s expected revenue from selling the car is at least
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