A Seller Knows That There Are Two Bidders for the Object

question 16

Multiple Choice

A seller knows that there are two bidders for the object he is selling. He believes that with probability , one has a buyer value of $5 and the other has a buyer value of $12 and, with probability , one has a buyer value of $10 and the other has a buyer value of $30. He knows that bidders will want to buy the object so long as they can get it for their buyer value or less. He sells it in an English auction with a reserve price which he must set before the auction starts. To maximize his expected profits, he should set the reserve price at

• A) $30.
• B) $5.
• C) $12.
• D) $10.
• E) $20.

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Definitions:

Title Pass

Title Pass refers to the transfer of ownership rights from one party to another, often involved in the sale and purchase of property or goods.

Unconditionally Appropriated

Assets or funds that are designated for a specific purpose or recipient without any conditions attached.

Assent

Agreement to the terms of an offer in contract law, which is a necessary component of contract formation.

Consumer Transaction

A commercial interaction between a seller and a consumer, often involving the purchase and sale of goods or services.