One assumption that economists often make while determining the outcome of a Dutch auction is that the bidders are ________.
A) risk neutral
B) risk averse
C) risk seekers
D) rent seekers

Question

Quizplus · Accepted Answer

Assuming that the bidders are risk-neutral means that they are not affected by the risk involved in the bidding process. In other words, they evaluate the expected value of the item being bid upon based solely on the price and their perceived value of the item, without considering any potential additional costs or benefits beyond winning or losing the auction. This assumption allows economists to predict the behavior of bidders and the outcome of the auction with greater accuracy.

One Assumption That Economists Often Make While Determining the Outcome