15-2. Two Bidder Auction You hold an auction on eBay and expect two bidders to show up....

Question:

15-2. Two Bidder Auction You hold an auction on eBay and expect two bidders to show up. You estimate that each bidder has a value of either $5 or $8 for the item, and you attach probabilities to each value of 50%. Your own value for the item is zero. You can set a reserve price, a price below which you will not accept bids for the item. What reserve price should you set, and what are your expected profit (surplus) from auctioning the item with a reserve price?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: