A manager bidding in an auction with independent private values for a large piece of industrial equipment has estimated that the expected profit from the equipment is $10 million. If the manager is indifferent about the uncertainty surrounding the expected profit of the equipment, the manager is_______ and the manager's value of the truck is ________ .

Question

Quizplus · Accepted Answer

A risk neutral manager is indifferent about the uncertainty surrounding the expected profit of the equipment. They are willing to take on risk as long as the expected value is equal to their valuation. Therefore, the manager's value of the truck is $10 million.

A Manager Bidding in an Auction with Independent Private Values