Scenario: An ancient painting is being auctioned off in an English auction. The following table shows the maximum willingness to pay of each bidder.

-Refer to the scenario above.Which of the following is true if David's maximum willingness to pay falls to $380?

Question

Scenario: An ancient painting is being auctioned off in an English auction. The following table shows the maximum willingness to pay of each bidder.
 
-Refer to the scenario above.Which of the following is true if David's maximum willingness to pay falls to $380?

Quizplus · Accepted Answer

If David's maximum willingness to pay falls to $380, he will no longer be the highest bidder since Rachel's maximum willingness to pay is $400. Therefore, James will not win the auction as option A suggests. However, Rachel may still take part in the auction since her maximum willingness to pay is higher than the current highest bid of $360. Option B is thus incorrect. As for option D, David will still not win the auction because his maximum willingness to pay is not the highest. Lastly, option C is supported by the fact that the owner of the painting will still receive the same highest bid of $400, resulting in the same average revenue regardless of David's reduced willingness to pay.

Scenario: an Ancient Painting Is Being Auctioned Off in an English