Isabella is participating in a first-price sealed-bid auction for a house. If there are 5 other bidders and her maximum willingness to pay for the house is $60,000, what is her optimal bidding strategy?
What will be an ideal response?
In a first-price sealed-bid auction, each bidder should place a bid below his maximum willingness to pay for the good. The exact value of the optimal bid depends on the number of bidders. In this case, the number of bidders is 6. Therefore, Isabella should place a bid of (5/6 ) × 60,000 = $50,000.
You might also like to view...
The above figure shows the market for gasoline. When a hurricane destroys a major refinery that refines oil into gasoline, the
A) demand curve for gasoline shifts from D1 to D2 and the supply curve of gasoline does not shift. B) demand curve for gasoline shifts from D1 to D2 and the supply curve of gasoline shifts from S2 to S1. C) demand curve for gasoline does not shift, and the supply curve of gasoline shifts from S2 to S1. D) demand curve for gasoline does not shift, and the supply curve of gasoline shifts from S1 to S2.
Suppose a tornado ravages a city, causing 5 million dollars in expenditures on new construction and healthcare for the victims. Those new expenditures
A) would be added to the gross domestic product account. B) would be subtracted from the gross domestic product account. C) would be added to the gross domestic product account and subtracted from the national income account. D) would impact GDP in none of the above ways.