A Seller Decides to Sell an Object by Means of a Sealed-Bid

question 13

Multiple Choice

A seller decides to sell an object by means of a sealed-bid second-price auction without a reservation price.There are two bidders.The seller believes that for each of the two bidders there is a probability of 1/2 that the bidder's value for the object is $600 and a probability of 1/2 that the bidder's value is $200.The seller believes that these probabilities are independent between bidders.If the bidders bid rationally, what is the seller's expected revenue from the auction?

• A)$600
• B)$400
• C)$300
• D)$280
• E)$360

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Definitions:

Perfect Information

A scenario in which all participants have access to all relevant information for decision-making.

Price Changes

Alterations in the selling price of goods or services over time due to various factors like supply and demand, inflation, or production costs.

Consumers

Consumers are individuals or groups that use goods and services generated within the economy to satisfy their personal needs and desires.

Jointly Owned

Pertains to a property or asset that is owned by two or more parties, with rights and responsibilities shared among them.