A Dealer Decides to Sell an Antique Automobile by Means

question 21

Multiple Choice

A dealer decides to sell an antique automobile by means of an English auction with a reservation price of $100. There are two bidders. The dealer believes that there are only three possible values that each bidder's willingness to pay might take, $7,300, $2,600, and $100. Each bidder has a probability of of having each of these willingnesses to pay, and the probabilities of the two bidders are independent of the other's valuation. Assuming that the two bidders bid rationally and do not collude, the dealer's expected revenue from selling the automobile is

• A) $3,333.33.
• B) $2,100.
• C) $2,600.
• D) $4,950.
• E) $7,300.

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Definitions:

Good Faith

Acting with honest intent without seeking to take unfair advantage over another party.

UCC

The Uniform Commercial Code, a standardized set of laws and regulations for conducting business and commercial transactions in the United States.

Sale of Goods

A commercial transaction where tangible personal property is transferred from a seller to a buyer for a price.

Standardized Contracts

Agreements using set terms and conditions for consistent application across many transactions or participants.