What is your optimal bid, You are the purchasing manager at

What is your optimal bid

Reference no: EM133333834

Case: CPT incorporated is a local manufacturer of conveyor systems. Last year, CPT sold over $2 million worth of conveyor systems that netted the company $100,000 in profits. Raw materials and labor are CPT's biggest expenses. Spending on structural steel alone amounted to over $500,000, or 25 percent of total sales. In an effort to reduce costs, CPT now uses an online procurement procedure that is best described as a first-price, sealed-bid auction. The bidders in these auctions utilize the steel for a wide variety of purposes, ranging from art to skyscrapers. This suggests that bidders value the steel independently, although it is perceived that bidder valuations are evenly distributed between $7,000 and $25,000.

Question: You are the purchasing manager at CPT and are bidding on three tons of six-inch hot-rolled channel steel against 6 other bidders. Your company values the three tons of channel steel at $18,000. What is your optimal bid?

Reference no: EM133333834

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