Asked by MacKenzie Greene on Sep 24, 2024
Verified
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
Bid-Rigging Cartel
A secretive agreement between competitors to fix bidding processes to ensure a predetermined outcome.
Winning Bid
The highest offer made in an auction that wins the item or contract being auctioned.
Bidders Values
The individual valuation that bidders assign to the item or items being auctioned, which influences their bidding strategy.
- Recognize the role of collusive behaviors like bid-rigging and how they impact auction outcomes.
Verified Answer
LD
Lauren Dewitt3 days ago
Final Answer :
C
Explanation :
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.
Learning Objectives
- Recognize the role of collusive behaviors like bid-rigging and how they impact auction outcomes.