Suppose that Alpha Inc., Richardson Industries, and K-Tek are the only three firms interested in a plot of land on the outskirts of town. The lot is being auctioned by a second-price sealed-bid auction. Alpha values the lot at $17,000, Richardson at $20,000, and K-Tek at $10,000. Each bidding firm's consumer surplus is CS=v₁ - P if it wins the auction and 0 if it loses. The values are private. What is each bidder's optimal bid? Who wins the auction, and what price does that firm pay? Alpha's optimal bid is $ , Richardson's optimal bid is $, and K-Tek's is $[ whole numbers.) (Enter your responses as

Suppose that Alpha Inc., Richardson Industries, and K-Tek are the only three firms interested in a plot of land on the outskirts of town. The lot is being auctioned by a second-price sealed-bid auction. Alpha values the lot at $17,000, Richardson at $20,000, and K-Tek at $10,000. Each bidding firm's consumer surplus is CS=v₁ - P if it wins the auction and 0 if it loses. The values are private. What is each bidder's optimal bid? Who wins the auction, and what price does that firm pay? Alpha's optimal bid is $ , Richardson's optimal bid is $, and K-Tek's is $[ whole numbers.) (Enter your responses as

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

Chapter18: Auctions

Section: Chapter Questions

Problem 1MC

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Question

Suppose that Alpha Inc., Richardson Industries, and K-Tek are the only three firms interested in a plot of land on the
outskirts of town. The lot is being auctioned by a second-price sealed-bid auction. Alpha values the lot at $17,000,
Richardson at $20,000, and K-Tek at $10,000. Each bidding firm's consumer surplus is
CS=v₁ - P
if it wins the auction and 0 if it loses. The values are private. What is each bidder's optimal bid? Who wins the auction,
and what price does that firm pay?
Richardson's optimal bid is $ and K-Tek's is $
Alpha's optimal bid is $
whole numbers.)
(Enter your responses as

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