A Seller Knows That There Are Two Bidders for the Object

question 19

Multiple Choice

A seller knows that there are two bidders for the object she is selling.She believes that with probability 1/2, one has a buyer value of $5 and the other has a buyer value of $10 and, with probability 1/2, one has a buyer value of $8 and the other has a buyer value of $15.She knows that bidders will want to buy the object so long as they can get it for their buyer value or less.She sells it in an English auction with a reserve price which she must set before the auction starts.To maximize her expected profits, she should set the reserve price at

• A)$5.
• B)$10.
• C)$8.
• D)$13.
• E)$15.

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Definitions:

Spatial Cognition

The ability to process information about the locations and attributes of objects in space.

Representing Space

The process or method by which spatial relationships and environments are described or depicted, as in maps, models, or visual arts.

Navigating

The act of planning and directing the course of a journey, using various tools and skills to reach a desired destination.

Reasoning

The action of thinking about something in a logical, sensible way to form a conclusion or judgment.