If, in an auction with independent private values, a manager values an item at a price that is lower than the item's expected profit, the manager is risk neutral.

Question

Quizplus · Accepted Answer

If the manager values an item at a price that is lower than the item's expected profit, it means that the manager is risk averse as they are willing to forgo potential profit to avoid the risk of overpaying for the item.

If, in an Auction with Independent Private Values, a Manager