Scenario: Alice is participating in a Dutch auction for a painting. There are five other bidders, and Alice values the painting at $30,000.
-Refer to the scenario above.Alice will earn an expected surplus of ________ if she uses her optimal strategy to win the game.

Question

Quizplus · Accepted Answer

In a Dutch auction, the price of the item being auctioned decreases until a bidder accepts the price. Alice's optimal strategy is to bid at the moment the price drops to her valuation of the painting, $30,000, assuming no one else has bid before that point. If she wins the painting at her valuation, her surplus is $0 because she pays exactly what she believes the painting is worth. However, the scenario does not provide specific information about the starting price of the auction, the decrement rate, or the valuations of other bidders, which are crucial to determine any surplus Alice might gain. Thus, without additional details, it's challenging to accurately determine the expected surplus based on the given options. My initial response was based on a misunderstanding of the provided scenario and options.

Scenario: Alice Is Participating in a Dutch Auction for a Painting