Question 1

The reservation price of the good at an auction denotes:

Accepted Answer

A) the initial bid price set by the seller in an English auction. 
B) the value assessed by an individual bidder that is independent of other bidders. 
C) the average bid price of the good quoted by the different bidders. 
D) the minimum price for the good that is expected by the seller. 
E) the buyer's optimal bid in a sealed-bid auction. 
A) the initial bid price set by the seller in an English auction. 
B) the value assessed by an individual bidder that is independent of other bidders. 
C) the average bid price of the good quoted by the different bidders. 
D) the minimum price for the good that is expected by the seller. 
E) the buyer's optimal bid in a sealed-bid auction. B

Question 2

Which of the following assumptions will lead to identical expected revenues under the English,sealed-bid,Dutch,and Vickrey auctions?

Accepted Answer

A) The true value of the good being auctioned is uncertain 
B) Some buyers adopt a dominant strategy 
C) All risk-neutral buyers adopt the equilibrium bidding strategies 
D) The probability that all competitors will choose the same bidding strategy is zero 
E) There are a large number of bidders with different reservation prices 
A) The true value of the good being auctioned is uncertain 
B) Some buyers adopt a dominant strategy 
C) All risk-neutral buyers adopt the equilibrium bidding strategies 
D) The probability that all competitors will choose the same bidding strategy is zero 
E) There are a large number of bidders with different reservation prices C

Question 3

The winner's curse occurs when:

Accepted Answer

A) the winning bidder is not at all optimistic. 
B) the winning bid exceeds the true value of a good. 
C) the losing contract bidder experiences frequent cost overruns. 
D) the winning bid is drawn from the left tail of the bid distribution. 
E) the firm's bid discount exceeds its (upward)estimation error. 
A) the winning bidder is not at all optimistic. 
B) the winning bid exceeds the true value of a good. 
C) the losing contract bidder experiences frequent cost overruns. 
D) the winning bid is drawn from the left tail of the bid distribution. 
E) the firm's bid discount exceeds its (upward)estimation error. B

Question 4

Which of the following auctions are strategically equivalent for bidders holding private values?

Accepted Answer

A) English auction and Dutch auction 
B) Sealed-bid auction and second-price auction 
C) English auction and Vickrey auction 
D) Vickrey auction and Dutch auction 
E) Vickrey auction and sealed-bid auction 
A) English auction and Dutch auction 
B) Sealed-bid auction and second-price auction 
C) English auction and Vickrey auction 
D) Vickrey auction and Dutch auction 
E) Vickrey auction and sealed-bid auction

Question 5

What circumstances encourage the sealed bid auction to generate greater revenue than the normal sealed-bid auction?

Accepted Answer

Same expected revenue can be obtained if

Question 6

Discuss the advantages of auctions as a type of transaction compared with posted prices and negotiated transactions.

Accepted Answer

Posted prices should be set in line with

Question 7

In a sealed-bid auction,a firm with a reservation price of $48,000 submits a bid of $40,000.If its probability of winning is 0.75,then its expected profit from the auction is _____.

Accepted Answer

A) $8,000 
B) $2,000 
C) $6,000 
D) $4,000 
E) $2,500 
A) $8,000 
B) $2,000 
C) $6,000 
D) $4,000 
E) $2,500

Question 8

The best competing bid distribution curve for a bidding firm is useful since it _____.

Accepted Answer

A) estimates the competitors' reservation prices 
B) precisely measures its own winning chances for its various bids 
C) estimates the probability that a competitor will follow a particular bid strategy 
D) measures the risks associated with a particular bid 
E) measures the profit derived from the winner's final bid 
A) estimates the competitors' reservation prices 
B) precisely measures its own winning chances for its various bids 
C) estimates the probability that a competitor will follow a particular bid strategy 
D) measures the risks associated with a particular bid 
E) measures the profit derived from the winner's final bid

Question 9

What is a reserve price? State its purposes and explain how it is advantageous from the seller's point of view.

Accepted Answer

Reserve price denotes a seller's value f

Question 10

(a)In a sealed-bid auction,there are three firms bidding.Each firm's bid lies within the range $25 million-$35 million,with all values in between equally likely.If the first firm is to bid $30 million,what would be the probability that its bid is the highest?

Accepted Answer

H (b)= [(3

Question 11

Auctions are a viable method of selling an item:

Accepted Answer

A) when one-on-one negotiation with a buyer is not possible. 
B) when the seller is not practicing monopoly. 
C) when a competitive market fails to exist. 
D) when the item is non-differentiated. 
E) when posted pricing under uncertain environment cannot take place. 
A) when one-on-one negotiation with a buyer is not possible. 
B) when the seller is not practicing monopoly. 
C) when a competitive market fails to exist. 
D) when the item is non-differentiated. 
E) when posted pricing under uncertain environment cannot take place.

Question 12

Firm Z is one of the 4 bidders,each with a value independently drawn from the range $20,000 to $60,000.All values are equally likely.Let us consider bi and vi as the holding value and bidding value of the bidder 'i' respectively.Therefore,in a sealed-bid auction,Firm Z's equilibrium bidding strategy will be_____.

Accepted Answer

A) bi = (0.25)(40,000)+ 0.75vi 
B) bi = (0.5)(20,000)+ 0.5vi 
C) bi = (0.5)(40,000)+ 0.5vi 
D) bi = (0.25)(20,000)+ 0.75vi 
E) bi = (0.75)(20,000)+ 0.25vi 
A) bi = (0.25)(40,000)+ 0.75vi 
B) bi = (0.5)(20,000)+ 0.5vi 
C) bi = (0.5)(40,000)+ 0.5vi 
D) bi = (0.25)(20,000)+ 0.75vi 
E) bi = (0.75)(20,000)+ 0.25vi

Question 13

The U.S.Beanbag Federation is accepting bids for televising the national championship playoffs.Competition is stiff,and the Federation expects bids to be higher this year than last.Officials of the Federation have estimated that the advertising revenue that a network might receive ranges from $500 million to $700 million (with all values in between equally likely).
(a)If the three major networks bid,what is the expected value of the winning bid?

Accepted Answer

There is a common,unknown value componen

Question 14

Compare the strategies bidders employ when participating in the English,sealed-bid,and Dutch auctions.

Accepted Answer

In an English auction with private value

Question 15

An auction which is characterized by descending bids is known as a(n):

Accepted Answer

A) English auction. 
B) Dutch auction. 
C) French auction. 
D) sealed-bid auction. 
E) second-price auction. 
A) English auction. 
B) Dutch auction. 
C) French auction. 
D) sealed-bid auction. 
E) second-price auction.

Question 16

The reserve price serves two related purposes.One of them is to elevate the final bid price.The other one is _____.

Accepted Answer

A) to raise the seller's personal value for the item 
B) to protect the seller from auctioning the good for too low a price 
C) to ensure that the highest bid remains identical for any type of auction 
D) to reach equilibrium bid-price level in case of asymmetric distribution of private value 
E) to keep the bid-price level within the maximum private value in the auction 
A) to raise the seller's personal value for the item 
B) to protect the seller from auctioning the good for too low a price 
C) to ensure that the highest bid remains identical for any type of auction 
D) to reach equilibrium bid-price level in case of asymmetric distribution of private value 
E) to keep the bid-price level within the maximum private value in the auction

Question 17

If the personal values of buyers' are drawn from different distributions,then which of the following can be rightly inferred?

Accepted Answer

A) Expected revenue of English auction will be equal to that of sealed-bid auction. 
B) Expected revenue of English auction will be better than that of sealed-bid auction. 
C) Expected revenue of sealed-bid auction will be better than that of English auction. 
D) Expected revenue of sealed-bid auction will be worse than that of second-price auction. 
E) Expected revenue of Vickrey auction will be better than that of sealed-bid auction. 
A) Expected revenue of English auction will be equal to that of sealed-bid auction. 
B) Expected revenue of English auction will be better than that of sealed-bid auction. 
C) Expected revenue of sealed-bid auction will be better than that of English auction. 
D) Expected revenue of sealed-bid auction will be worse than that of second-price auction. 
E) Expected revenue of Vickrey auction will be better than that of sealed-bid auction.

Question 18

An item with a common unknown value is being sold via an English auction.Is there any possibility of winner's curse? Explain.

Accepted Answer

Like the sealed-bid auction,the English

Question 19

A dealer,who buys items at antique auctions every week,notices a consistent pattern in large antiques auctions.Items auctioned in the first 30 minutes and in the last 30 minutes tend to fetch lower than expected prices.Items in the middle of the auction claim relatively high prices.
(a)If the dealer's observation is correct,are antique buyers behaving rationally?

Accepted Answer

The dealer can exploit this pattern by e

Question 20

Which of the following is true of an English auction with private buyers?

Accepted Answer

A) The bid value can exceed the reservation price of the buyer who wins. 
B) A typical buyer shades his/her bid below the true private value. 
C) A bidder takes a decision under uncertainty. 
D) The final price is approximately equal to the second highest buyer value. 
E) The first bidder obtains the item getting auctioned at the current price. 
A) The bid value can exceed the reservation price of the buyer who wins. 
B) A typical buyer shades his/her bid below the true private value. 
C) A bidder takes a decision under uncertainty. 
D) The final price is approximately equal to the second highest buyer value. 
E) The first bidder obtains the item getting auctioned at the current price.

The reservation price of the good at an auction denotes:

Which of the following assumptions will lead to identical expected revenues under the English,sealed-bid,Dutch,and Vickrey auctions?

The winner's curse occurs when:

Which of the following auctions are strategically equivalent for bidders holding private values?

What circumstances encourage the sealed bid auction to generate greater revenue than the normal sealed-bid auction?

Discuss the advantages of auctions as a type of transaction compared with posted prices and negotiated transactions.

In a sealed-bid auction,a firm with a reservation price of $48,000 submits a bid of $40,000.If its probability of winning is 0.75,then its expected profit from the auction is _____.

The best competing bid distribution curve for a bidding firm is useful since it _____.

What is a reserve price? State its purposes and explain how it is advantageous from the seller's point of view.

(a)In a sealed-bid auction,there are three firms bidding.Each firm's bid lies within the range $25 million-$35 million,with all values in between equally likely.If the first firm is to bid $30 million,what would be the probability that its bid is the highest?

Auctions are a viable method of selling an item:

Compare the strategies bidders employ when participating in the English,sealed-bid,and Dutch auctions.

An auction which is characterized by descending bids is known as a(n):

The reserve price serves two related purposes.One of them is to elevate the final bid price.The other one is _____.

If the personal values of buyers' are drawn from different distributions,then which of the following can be rightly inferred?

An item with a common unknown value is being sold via an English auction.Is there any possibility of winner's curse? Explain.

Which of the following is true of an English auction with private buyers?

Introduction to Economic Decision Making

Optimal Decisions Using Marginal Analysis

Demand Analysis and Optimal Pricing

Estimating and Forecasting Demand

Production

Cost Analysis

Perfect Competition

Monopoly

Oligopoly

Game Theory and Competitive Strategy

Regulation, Public Goods, and Benefit-Cost Analysis

Decision Making Under Uncertainty

The Value of Information

Asymmetric Information and Organizational Design

Bargaining and Negotiation

Linear Programming

Filters

Exam 16: Auctions and Competitive Bidding

The reservation price of the good at an auction denotes:

Which of the following assumptions will lead to identical expected revenues under the English,sealed-bid,Dutch,and Vickrey auctions?

The winner's curse occurs when:

Which of the following auctions are strategically equivalent for bidders holding private values?

What circumstances encourage the sealed bid auction to generate greater revenue than the normal sealed-bid auction?

Discuss the advantages of auctions as a type of transaction compared with posted prices and negotiated transactions.

In a sealed-bid auction,a firm with a reservation price of $48,000 submits a bid of $40,000.If its probability of winning is 0.75,then its expected profit from the auction is _____.

The best competing bid distribution curve for a bidding firm is useful since it _____.

What is a reserve price? State its purposes and explain how it is advantageous from the seller's point of view.

(a)In a sealed-bid auction,there are three firms bidding.Each firm's bid lies within the range $25 million-$35 million,with all values in between equally likely.If the first firm is to bid $30 million,what would be the probability that its bid is the highest?

Auctions are a viable method of selling an item:

Compare the strategies bidders employ when participating in the English,sealed-bid,and Dutch auctions.

An auction which is characterized by descending bids is known as a(n):

The reserve price serves two related purposes.One of them is to elevate the final bid price.The other one is _____.

If the personal values of buyers' are drawn from different distributions,then which of the following can be rightly inferred?

An item with a common unknown value is being sold via an English auction.Is there any possibility of winner's curse? Explain.

Which of the following is true of an English auction with private buyers?

Introduction to Economic Decision Making

Optimal Decisions Using Marginal Analysis

Demand Analysis and Optimal Pricing

Estimating and Forecasting Demand

Production

Cost Analysis

Perfect Competition

Monopoly

Oligopoly

Game Theory and Competitive Strategy

Regulation, Public Goods, and Benefit-Cost Analysis

Decision Making Under Uncertainty

The Value of Information

Asymmetric Information and Organizational Design

Bargaining and Negotiation

Linear Programming

Filters