I I . _ 3. Individual Problems 1873 A reserve prlce is a mlhimum prlce set by the auctioneer. If no bldder is willing to pay the reserve price. the item is unsold at a proflt of $0 for the auctioneer. If only one bidder values the ltern at or above the reserve price, that bidder pays the reserve price. An auctloneer faces two bidders, each Wlth a value of either $144 or $192, with both values equally probable. Without a resewe price, the second highest bid will be the pi'lce paid by the wmnlng bidder. The followmg table lists the tour possible combinatlons tor bidder values. Each combination is equally likely to occur. On the followmg tab/e, indicate the price paid by the wlnm'ng bidder with and without the stated reserve price. Bidder 1 Value Bidder 2 Value Price Without Reserve ($) (5) Probability (5') Price with $192 Reserve Price $144 $144 025 l 7V $144 $192 0.25 _V _V $192 $144 0.25 _V _V $192 $192 0.25 l _V Without a reserve price, the expected pnce is With a reserve price of 5192, the expected pl'lCE IS . Thus, the expected price is larger V the reserve price. 3. Individual Problems 18-3 A reserve price is a minimum price set by the auctioneer. If no bidder is Willing to pay,r the reserve price, the item is unsold at a profit of $0 for the auctioneer. If only one bidder values the item at or above the reserve price, that bidder pays the reserve price. An auctioneer faces two bidders, each with a value of either $144 or $192, with both values equally probable. Without a reserve pricer the second highest bid will be the price paid by the winning bidder. The following table lists the four pOSSible combinations for bidder values. Each combination is equally likely to occur. On the foiiowmg tabi'e, indicate the price paid by the Winning bidder with and without the stated reserve price. Bidder 1 Value Bidder 2 Value Price Without Reserve (5) {37) Probability {5) Price with 5192 Reserve Price $144 $144 025 v 7 $144 $192 0.25 V $144 $192 $144 0.25 '7 $192 $192 0.25 $0 7 $192 1.!) .Thus, the Without a reserve price, the expected price is . eserve price of 5192, the expected price is expected price is larger 'V the reserve price. 3. Individual Problems 18-3 A reserve price is a minimum price set by the auctioneer. If no bidder is Willing to pay the reserve price, the item is unsold at a profit of $0 for the auctioneer If only one bidder values the item at or above the reserve price, that bidder pays the reserve price. Ah auctioneer faces two bidders, each with a value of either $144 or $192, with both vaiues equally probable. Without a reseive price, the second highest bid will be the price paid by the Winning bidder The Followmg table lists the Four posSible combinations for bidder values. Each combination is equaHy likeiv to occur. On the following table, indicate the price paid by the winning bidder with and without the stated reserve price. Bidder 1 Value Bidder 2 Value Price Without Reserve (2\" {$) Probability {$) Price with $192 Reserve Price $144 $144 0.25 V V $144 $192 0.25 v $144 $192 $144 0.25 V $192 $192 0.25 '7 $192 50 . With a reserve price of 5192, th ed price is . Thus, the expected price is iai'gei' V' the reserve price. Without a reserve price, the expected price is 3. Individual Problems 18-3 A reserve price is a minimum price set by the auctioneer. If no bidder is willing to pay the reserve price, the item is unsold at a profit of $0 for the auctioneer: If only one bidder values the item at or above the reserve price, that bidder pays the reserve price. An auctioneer faces two bidders, each with a value of either $144 or $192, with both values equally probable. Without a reselve price, the second highest bid will be the price paid by the winning bidder. The followmg table lists the four passable combinations for bidder values. Each combination is equally likely to occur. On the foiiowing rabie, indicate the price paid by the winning bidder with and without the stated reserve price. Bidder 1 Value Bidder 2 Value Price Without Reserve (ES) (3?) Probability {$) Price with $192 Reserve Price $144 $144 0.25 L 77 $144 $192 0.25 ; 7V $192 $144 0.25 l 7" $192 0.25 l _v ted price is . With a reserve price 01'5192, the expected price is . Thus, the expected price is larger V the reserve price. Without a reserve priceI