8) Ronald Ulysses Swanson
Ron Swanson, the owner of Very Good Building and Development, built a very good
table, which cost him $400 to build. He is selling his table at the Indiana Fine
Woodworking Association Convention. Suppose that his table appeals strongly to
40 percent (willing to pay $1,000) and moderately to 60 percent (willing to pay
$600) of the members of the association at the convention. Unfortunately, due to
the many other alternative pieces of furniture for sale, only two potential buyers
approach him all night. Note that in this case, there are only four possibilities,
either they are both strong appeal, both moderate appeal, or one is strong and the
other is moderate (or vice versa). Ron doesn't know which type they are for sure,
just the information mentioned previously about the proportion of the members
that are strong and moderate appeal at the convention.
10
1 point
8) Ronald Ulysses Swanson (Part a)
If he sells his very good table at a single posted price, a price of
choose your answer...
$\text{type your answer...}$
would result in a maximized expected profit of
11
1 point
8) Ronald Ulysses Swanson (Part b)
What would be his expected profit if instead, he sells his table using a second-
price auction?
$E[\text{profit}] = \$ \text{type your answer...}$
12
1 point
8) Ronald Ulysses Swanson (Part c)
If more people were to enter the auction, would his expected profit go up or down?
Why?
Edit View Insert Format Tools Table
12pt Paragraph BIU A T2
