15030390 14090 12600 Price 3 50 Expected Profit 25002 150050808 5003030390

# 15030390 14090 12600 price 3 50 expected profit 25002

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100*(0.15/0.3)*0.3]*90 =\$140*90 = \$12,600 Price 3 = \$50, Expected Profit = [250*0.2 + 150*(0.5/0.8)*0.8 + 50*(0.3/0.3)*0.3]*90 = \$140*90 = \$12,600 Price 2 = \$100 Price 3 = \$50, Expected Profit = [250*0.2 + 100*(0.65/0.8)*0.8 + 50*(0.15/0.15)*0.15]*90 = \$122.5*90 = \$11,025
Price 1 = \$200 Price 2 = \$150 Price 3 = \$100, Expected Profit = [200*0.5 + 150*(0.2/0.5)*0.5 + 100*(0.15/0.3)*0.3]*90 = \$145*90 = \$13,050 Price 3 = \$50, Expected Profit = [200*0.5 + 150*(0.2/0.5)*0.5 + 50*(0.3/0.3)*0.3]*90 = \$145*90 = \$13,050 Price 2 = \$100 Price 3 = \$50, Expected Profit = = [200*0.5 + 100*(0.35/0.5)*0.5 + 50*(0.15/0.15)*0.15]*90 = \$142.5*90 = \$12,825 Price 1 = \$150 Price 2 = \$100 Price 3 = \$50, Expected Profit = [150*0.7 +100*(0.15/0.3)*0.3 + 50*(0.15/0.15)*0.15]*90 = \$127.5*90 = \$11,475 The optimal markdown is P 1 =\$300, P 2 =\$200, P 3 =\$100 Profit (max) =\$13,500 Question 2: Bidding on Martha’s Vineyard Since now the other bidder will make a bid between \$1.4 and \$1.6 Million with equally likely possibility, we need to re-calculate the Hilton P-Win possibilities. The updated expected surplus scheme should look like this: Surplus = ((P-1400)/200) *(1550-P) To Maximize the surplus, we find that
Thus, we recommend the optimal bidding to be \$1,475,000 with a surplus of \$28125. Question 3: Auction Vignettes – B 3. Given the “Proxy bid” system that both eBay & Amazon use, is there an incentive to shade bids downwards?

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• Fall '15
• Auction, Price3

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