A buyer has value vb for a potential acquisition and believes the sellers reservation price has the
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πb = (vb - P)Pr(P accepted) = (vb - P)F(P).
Find the buyer’s marginal profit and set it equal to zero. Show that the buyer’s optimal price satisfies P = vb - F(P)/f(p), where f(v) = dF(v)/dv is the associated density function. The buyer shades down its value in making its optimal bid.
Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...
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Managerial economics
ISBN: 978-1118041581
7th edition
Authors: william f. samuelson stephen g. marks
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