What will be the final bid-price that is paid to the seller

Assignment Help Business Economics

Reference no: EM13983941

Suppose there are 3 risk-neutral bidders that are interested in purchasing a Pablo Picasso painting at an auction. The bidders have valuations for the painting of $8 million, $10 million, and $15 million. The bidders do not know each other's valuations. Bids can be in thousand dollar increments.

a) For each of the three auctions listed below, explain which bidder will win, what will be the final bid-price that is paid to the seller, and what will be the final profits for each of the three bidders. Fully explain your answers and any assumptions you make.

i) Open-cry English auction

ii) Second-price sealed-bid Vickery auction

iii) First-price sealed-bid auction

b) Contrast your answers for the three auctions. Fully explain what the cause of any differences was.

c) If you were the seller of the Picasso painting, which auction would you prefer? Explain.

Reference no: EM13983941

Questions Cloud

What are the various stages of the product cycle : What are the various stages of the product cycle? What does the product cycle model tell us about international trade and technology?

How does a country get a comparative advantage : How does a country get a comparative advantage? How would you be able to figure out which product categories or industries the United States has a comparative advantage in?

Discuss the income-distribution effects of trade : Discuss the income-distribution effects of trade a) between countries (HINT: terms of trade) and b) within countries (HINT: Samuelson).

Prices resulting from changes in demand-supply conditions : The main purpose of studying a market is to be able to predict qualitatively and quantitatively changes in prices resulting from changes in demand and supply conditions. For each of the following events, assume that either the supply curve or the dem..

What will be the final bid-price that is paid to the seller : Suppose there are 3 risk-neutral bidders that are interested in purchasing a Pablo Picasso painting at an auction. The bidders have valuations for the painting of $8 million, $10 million, and $15 million. The bidders do not know each other's valuatio..

Find profit maximizing output and price : Tad's bait shop has a monopoly in the bait market. Demand is given by q=56-8p and mc=0.25q. find profit maximizing output and price. find the level of consumer surplus that accompanies tad's profit max choice of output and price. determine what consu..

What is the optimal action for the agent : Insurance Consider a risk avers agent who owns an asset worth 100 USD. The agent can choose one of two actions: being cautious a1 or being negligent (a0). The agent’s payoff from having wealth w and taking action a is given by u(w_1,a_0 )=√x and u(w_..

Consider a monopoly with a production function : Consider a monopoly with a production function given by q = f(x) = √x and a fixed cost of $1. The input price is $0.50. The monopolist sells her product in a market that has ten consumers. Let p denote the unit price of the good. Find the profit-maxi..

User Account

All Pages