Managerial Economics – ECP 3703Eastern Florida State College – Palm Bay CampusChapter 18 Answer KeyChapter 18Multiple Choice Questions1.You are bidding in a second-price auction for a painting that you value at $800. You estimate that other bidders are most likely to value the painting at between $200 and $600. Which of these is likely to be your best bid?a.$1,000 [you should never bid above your value as you might end up paying more than the painting is worth to you.]b.$800 [correct; in a second-price auction, the optimal strategy is to bid exactly your value.]c.$600 [If you are wrong and some other bidder values the painting at $700, you would end up losing the auction even though you would have been willing to pay $700.]d.$400 [You are unlikely to win a t a price this low.]
2.Which of the following is true about different ways of conducting a private-value auction?