Scenario: Tom, Pat, Arthur, and Julie are participating in a second-price auction for a good. Tom values the good at $150, Pat values it at $180, Arthur values it at $250, and Julie values it at $200.
-Refer to the scenario above.Arthur should place a bid of ________.
A) $187.50
B) $200
C) $225
D) $250

Question

Quizplus · Accepted Answer

In a second-price auction, the winner pays the second-highest bid. Therefore, each bidder should bid their true valuation of the good to maximize their utility. Arthur values the good the most at $250, so he should bid $250.

Scenario: Tom, Pat, Arthur, and Julie Are Participating in a Second-Price