Author Question: For consumers, goods A and B are complementary goods. The cost of a resource used in the production ... (Read 96 times)

cherise1989

  • Hero Member
  • *****
  • Posts: 555
For consumers, goods A and B are complementary goods. The cost of a resource used in the production of A decreases. As a result
 
  A) the equilibrium price of B will fall and the equilibrium price of A will rise.
  B) the equilibrium price of B will rise and the equilibrium price of A will fall.
  C) the equilibrium prices of both A and B will rise.
  D) the equilibrium prices of both A and B will fall.

Question 2

Mr. Smith won a laptop in an online auction in which bidders could see each other's bid and price increased with every new bid.
 
  a) If Mr. Smith values the laptop at 400, find out his dominant strategy.
  b) Will there be a change in his optimal bidding strategy if there is an increase in the number of bidders?



sarahccccc

  • Sr. Member
  • ****
  • Posts: 318
Answer to Question 1

B

Answer to Question 2

a) Mr. Smith is participating in an English auction. In an English auction, bidders can see each other's bid and price increases with every new bid. The auctioneer starts bidding at a price below every bidder's willingness to pay and asks who would like to bid. Each bidder should continue to bid until the price reaches his maximum willingness to pay for the good because he has to pay his bid if he wins. Therefore, Mr. Smith should continue bidding as long as the price is below 400. This is his dominant strategy.
b) In an English auction, the optimal bidding strategy of a bidder does not depend on the number of bidders participating in the auction. Each bidder continues to bid as long as price lies below his willingness to pay. The highest bidder wins and pays an amount equal to the second-highest bid (or slightly higher if second-highest bidder bids his highest value exactly).



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

Hyperthyroidism leads to an increased rate of metabolism and affects about 1% of women but only 0.1% of men. For most people, this increased metabolic rate causes the thyroid gland to become enlarged (known as a goiter).

Did you know?

There are actually 60 minerals, 16 vitamins, 12 essential amino acids, and three essential fatty acids that your body needs every day.

Did you know?

Not getting enough sleep can greatly weaken the immune system. Lack of sleep makes you more likely to catch a cold, or more difficult to fight off an infection.

Did you know?

During pregnancy, a woman is more likely to experience bleeding gums and nosebleeds caused by hormonal changes that increase blood flow to the mouth and nose.

Did you know?

There are 20 feet of blood vessels in each square inch of human skin.

For a complete list of videos, visit our video library