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Unformatted text preview: ECOS2201 - Economics of Competition and Strategy Workshop - 8 1. A pub sells steak and wine. The marginal cost of a steak is .5 and of a wine is 1. Davo values a steak at 6 and a glass of wine at 2. Jeremy values a steak at 2 and a wine at 4. (i) Will the pub choose to bundle steak and wine or sell them separately. (ii) If marginal cost of steak was 1 and wine was 2 what would the pub do. (iii) Compare your answers in (i) and (ii) and explain. 2. Valuations of bidders are uniformly distributed on the interval [0 , 20]. Let their be three bidders. (i) Calculate the expected revenue of the seller if the seller uses a first price sealed bid auction. (ii) What should a bidder with valuation 12 bid? (iii) Provide intuition as to why a english auction and a second price sealed bid auction yields the seller the same expected revenue as in (i) above. 3. Assume valuation are evenly (uniformly) distributed over the interval [300 , 400]....
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- One '09