The buyer is conducting an auction for a contract. There are going to be two bidders in this auction, whom we call Bidder 1 and Bidder 2. The auction is open bid. The bid decrement is $1million. The contract will be awarded to the lowest bidder. The Reserve price is $200 million. The two bidders have exactly the same cost structure. In case a bidder wins the contract this bidder decides whether to deliver High Quality or Low Quality. Low Quality costs $10 Million. High Quality costs $20 million. The value of the

contract to the buyer depends on the quality. Low Quality is worth $30 Million, High Quality is worth $80 million.

Assuming that this relationship is one shot. in equilibrium the final auction price will be $________

Million and the quality delivered will be (high or low)_____

The profit of the the winning bidder will be $______

Million and the profit of the Buyer will be $._____

Million.

Gains from trade is the difference between the buyer value and the winning bidder's cost. In the efficient scenario (the best possible scenario for the supply chain as

whole) gains from trade would be s_______

Million, But gains from trade in equilibrium are ______

Million.