In an auction where the bidders values are $400,$500,$650,$800 and $850,the highest two bidders form a bid-rigging cartel.What would have the winning bid been if there was no cartel?
A)$501
B)$651
C)$801
D)$846

Question

In an auction where the bidders values are $400,$500,$650,$800 and $850,the highest two bidders form a bid-rigging cartel.What would have the winning bid been if there was no cartel?
A)​$501
B)$651
C)$801
D)​$846

Quizplus · Accepted Answer

Without the cartel, the highest bidder would win the auction, so the winning bid would be $850. However, since the highest two bidders form a cartel, they can agree to bid lower than their true values to secure the win and pay a lower price. Let's assume they agree to bid $800, which is lower than the second-highest bidder's true value of $850 but higher than the third-highest bidder's true value of $650. In this case, the cartel wins the auction with a bid of $800, and the winning bid is $800.

In an Auction Where the Bidders Values Are $400,$500,$650,$800 and $850,the