In a sealed-bid auction,a firm with a reservation price of $48,000 submits a bid of $40,000.If its probability of winning is 0.75,then its expected profit from the auction is _____.

Name: In a sealed-bid auction,a firm with a reservation price of $48,000 submits a bid of $40,000.If its probability of winning is 0.75,then its expected profit from the auction is _____.
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Question

Quizplus · Accepted Answer

Expected profit = (probability of winning) x (profit if win - bid amount) 
= 0.75 x ($48,000 - $40,000) 
= $6,000

In a Sealed-Bid Auction,a Firm with a Reservation Price of $48,000