Winston\'s Sporting Goods would like to sell an additional 2,700 shares of stock

Question

Winston's Sporting Goods would like to sell an additional 2,700 shares of stock using the Dutch auction method. The bids received are as follows: (Table below should be interpreted as follows: Bidder A is willing to pay $34 for each share, up to 1,300 shares while bidder B is willing to pay $35 for each share, up to 1,800 shares)

(Hint: Remember that for Dutch auctions, sell shares first to bidder with willing to pay the highest price and then to bidder with second highest price and so on until all shares are sold. However, every bidder will pay the price of the last bidder to receive any shares. In other words, everyone will pay the lowest price of all successful bidders receiving shares regardless of their own price bids.)

Bidder             Quantity          Price

    A                    1,300            $34

    B                    1,800            $35

    C                    2,900            $32

    D                       400            $36

Bidder C will receive _____ shares.
a. 0
b. 2,900
c. 1,200
d. 700
e. 2,700

Explanation / Answer

Once all the bids are submitted, the allotted placement is assigned to the bidders from the highest bids down, until all of the allotted shares are assigned.

However, the price that each bidder pays is based on the lowest price of all the allotted bidders, or essentially the last successful bid.

D will get 400 shares at 32$, B will get 1800 shares at 32$, A wii get 500 shares.

C will not get any shares.

Answer a

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