Question
Not sure how to get this answer but it is below ,with the answers (Managerial Economics) 1.A bidder's value for a good may be low
Not sure how to get this answer but it is below ,with the answers (Managerial Economics)
1.A bidder's value for a good may be low ($2), medium ($5), or high ($7). There is an equal number of potential bidders having each value. Suppose two bidders participate in a second-price auction. What is the best estimate of the expected revenue from the auction?
a.$4.11 [draw a table of the nine possible outcomes. The second-highest value sets the price in each auction. For example, the price is $7 only 1/9 of the time.]
b.$3.99 [draw a table of the nine possible outcomes. The second-highest value sets the price in each auction.]
c. 3.56 [correct; the price is $7 1/9 of the time, $5 3/9 of the time, and $2 5/9 of the time.]
My teachers explanations are in [ ] ----> but is there a different way to understand c. ?
---> what does 2 bidders have to do with this?
Thank you
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