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What is the expected value of v

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Reference no: EM131154763

A seller offers a good with value v ∈ {0, . . . , 10}, i.e., v is one of these 11possible values. The seller knows the exact value of v, but a potentialbuyer only knows that each value of v is equally likely (it is uniformly2 distributed). The buyer makes an offer b and the seller accepts the offerif and only if b ≥ v.

(a) What is the expected value of v?

(b) What is the expected value of v, given that the seller accepts theoffer?

(c) What is the buyer's equilibrium value of b?(d) Explain this result.

Reference no: EM131154763

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