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:

Differentiation

The strategy of distinguishing a product or brand from competitors to make it more attractive to a particular target market.

Brand Recognition Strategy

Tactics employed by businesses to make their brand easily identifiable and memorable to consumers.

Marketers

Individuals or teams specializing in creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

Decoys

In marketing, products or pricing strategies designed to influence the consumer's choice by making other options appear more attractive.