The U.S. Beanbag Federation is accepting bids for televising the national championship playoffs. Competition is stiff, and the Federation expects bids to be higher this year than last. Officials of the Federation have estimated that the advertising revenue that a network might receive ranges from $500 million to $700 million (with all values in between equally likely).
(a) If the three major networks bid, what is the expected value of the winning bid?
(b) Fox Network has expressed an interest in televising the playoffs. If Fox enters the bidding, what is the new expected value of the winning bid?
(c) Explain why the addition of a new bidder raises the value of the expected winning bid.
(d) How does an increase in the number of bidders affect the likelihood of the winning bidder suffering the winner's curse?

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The Answer of The U.S. Beanbag Federation is accepting bids for televising the national championship playoffs. Competition is stiff, and the Federation expects bids to be higher this year than last. Officials of the Federation have estimated that the advertising revenue that a network might receive ranges from $500 million to $700 million (with all values in between equally likely).
(a) If the three major networks bid, what is the expected value of the winning bid?
(b) Fox Network has expressed an interest in televising the playoffs. If Fox enters the bidding, what is the new expected value of the winning bid?
(c) Explain why the addition of a new bidder raises the value of the expected winning bid.
(d) How does an increase in the number of bidders affect the likelihood of the winning bidder suffering the winner's curse?

The US Beanbag Federation Is Accepting Bids for Televising the National