Scenario: Consider the following situation. Molly is one among the sixty-one bidders who take part in a first-price auction for vintage furniture. Molly places a value of $850, the highest value, for a vintage dressing table that comes up for auction. Joseph has the second-highest willingness to pay of $750.
-Refer to the scenario above.Which of the following is an optimal bid for Molly?
A) $836
B) $750
C) $825.50
D) $700

Question

Quizplus · Accepted Answer

Molly's optimal bid is $836, which is slightly below her true value of $850. This is because in a first-price auction, the highest bidder wins the item and pays their bid price. If Molly bids $850, she will win the auction but will pay more than she needs to. By bidding $836, she can still win the auction but will pay less than her true value.

Scenario: Consider the Following Situation