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.

---

Definitions:

Parasympathetic Division

Part of the autonomic nervous system responsible for conserving energy and restoring the body to a state of calm after periods of stress or danger.

Preganglionic Neurons

Neurons of the autonomic nervous system that extend from the central nervous system to the autonomic ganglia.

Parasympathetic Division

Part of the autonomic nervous system responsible for rest and digestion functions, decreasing heart rate, and increasing intestinal activity.

Preganglionic Neurons

are neurons originating in the central nervous system that extend to autonomic ganglia, communicating signals to postganglionic neurons outside the central nervous system.