Exam 17: Auctions and Competitive Bidding Available Online

There are five risk-neutral bidders, each having a private value that is independently drawn from the range $60 thousand to $120 thousand with all values in between equally likely. The respective expected revenues (in $ thousands) from the English and sealed-bid auctions are:

A manager recommends selling one of the firm's divisions to a prospective buyer through bargaining, rather than soliciting competitive bids from other firms. Does this strategy make sense?

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

The reservation price of the good at an auction denotes:

A reserve price serves two related purposes. One is to elevate the expected final bid price. The other purpose is to:

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

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

Assume that there are 9 bidders with reservation prices independently and uniformly distributed between $100,000 and $180,000. What is the expected value of the sale price at an English auction?

If the personal value of one of the buyers is drawn from a distribution with a higher range of values than the other buyers, then which of the following statement is correct?

Consider a sealed-bid auction where the reservation price of a firm is $7.5 million, its bid is $7 million, and the probability of winning at this bid is .4. Calculate the firm's expected profit.

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

Firm Z is one of 4 bidders, each with a value independently drawn from the range $20,000 to $60,000 with all values in between being equally likely. In a sealed-bid auction, Firm Z's equilibrium bidding strategy is:

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

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 .75, then its expected profit from the auction is:

A particular good was withdrawn from the market after bids were opened. This implies that:

Which of the following is incorrect?

When buyers hold private values, which of the following conditions leads to identical expected revenues under the English, sealed-bid, Dutch, and Vickrey auctions?

In a sealed-bid auction with private values drawn independently from a common distribution, each buyer's equilibrium bid is set equal to:

In a private-value model with risk-neutral buyers, compare the expected revenues generated by English and sealed-bid auctions.

What are incentive contracts? Explain why and when a buyer writes an incentive contract.