-bidU2. Suppose that three risk-neutral bidders are interested in purchasing aPrincess Beanie Baby. The bidders (numbered 1 through 3) have valua-tions of $12, $14, and $16, respectively. The bidders will compete in auc-tions as described in parts (a) through (d); in each case, bids can be madein $1 increments at any value from $5 to $25.(a) Which bidder wins an open-outcry English auction? What are thefinal price paid and the profit to the winning bidder?(b)Which bidder wins a second-price, sealed-bid auction? What are thefinal price paid and the profit to the winning bidder? Contrast youranswer here with that for part (a). What is the cause of the differencein profits in these two cases?190HO(c) In a sealed-bid, first-price auction, all the bidders will bid a positiveamount (at least $1) less than their true valuations. What is the likelyoutcome in this auction? Contrast your answer with those for parts(a) and (b). Does the seller of the Princess Beanie Baby have any clearreason to choose one of these auction mechanisms over the other?(d) Risk-averse bidders would reduce the shading of their bids in part(c); assume, for the purposes of this question, that they do not shadeat all. If that were true, what would be the winning price (and profitfor the bidder) in part (c)? Does the seller care about which type ofauction she chooses? Why?moit

An auction is a kind of economic mechanism that serves the aim of allocating items and determining…

U2. Suppose that three risk-neutral bidders are interested in purchasing a Princess Beanie Baby. The bidders (numbered 1 through 3) have valua- tions of $12, $14, and $16, respectively. The bidders will compete in auc- tions as described in parts (a) through (d); in each case, bids can be made in $1 increments at any value from $5 to $25. (a) Which bidder wins an open-outcry English auction? What are the final price paid and the profit to the winning bidder? (b) Which bidder wins a second-price, sealed-bid auction? What are the final price paid and the profit to the winning bidder? Contrast your answer here with that for part (a). What is the cause of the difference in profits in these two cases? (c) In a sealed-bid, first-price auction, all the bidders will bid a positive amount (at least $1) less than their true valuations. What is the likely Med

U2. Suppose that three risk-neutral bidders are interested in purchasing a Princess Beanie Baby. The bidders (numbered 1 through 3) have valua- tions of $12, $14, and $16, respectively. The bidders will compete in auc- tions as described in parts (a) through (d); in each case, bids can be made in $1 increments at any value from $5 to $25. (a) Which bidder wins an open-outcry English auction? What are the final price paid and the profit to the winning bidder? (b) Which bidder wins a second-price, sealed-bid auction? What are the final price paid and the profit to the winning bidder? Contrast your answer here with that for part (a). What is the cause of the difference in profits in these two cases? (c) In a sealed-bid, first-price auction, all the bidders will bid a positive amount (at least $1) less than their true valuations. What is the likely Med

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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No written by hand solution
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