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Questions for Class Discussion
1. As a consultant for a major theater chain, your task is to predict the box office
gross revenues (per screen) for a given film in a given city, week by week.
Describe how you would set about making this kind of forecast. Which factors
listed below might be relevant?
• Category and Characteristics of Film
• City-Specific Audience Characteristics
• Number of Weeks Since Initial Release
• Number of Theaters Showing Film in City
• Time of Year
• Other Factors (such as?)
Which factors can be expressed quantitatively? Which qualitatively?
Accounting for these factors, what degree of error remains in your forecast?
2. How would your forecasting model help in evaluating the following
statement? “The practice of blind bidding places undue risk on theater
owners.”
3. How are competing buyers’ reservation prices for films determined? Is
this an instance of a common, unknown value, or private personal values,
or something in between?
Bidding for Films Data Sheet
Theater Chain __________
Team Members ______________________ ______________________
______________________ ______________________
Average Weekly Film Gross
(Your Estimate) Your Bid*
Film A
Film B
Film C
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Film D
Film E
Film F
Film G
Film H
Estimate of Weekly
Gross Receipt:_________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
_______________________________________________________
Bidding
Strategy:_____________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
_______________________________________________________
ADDITIONAL MATERIALS
I. Short Readings
Jeff Sommers, “Merger Fever can be a Menace for Shareholders, The Wall Street
Journal, June 22, 2014, p. BU3.
Matthew Futterman, “NBC gets Olympic-Size Deal,” The Wall Street Journal, May
12, 2014, p. B4.
Dana Mattiolida, “Tyson Wins Bid against Itself,” The Wall Street Journal, June 10,
2014, p. A1.
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Jacques Gansler, “To Save on Defense Hire Rivals,” The New York Times, February
27, 2014, p. A27.
J. Vascellaro and M. Futterman, “NBC Realizes Olympic Dream,” The Wall Street
Journal, June 8, 2011, p. B1.
R. Sandomir, “NBC Wins U.S. Television Rights to Four More Olympics,” The New
York Times, June 8, 2011, pp. B13, B15.
M. Esterl, “Delta Makes Fliers Bid to get Bumped,” The Wall Street Journal,
January 14, 2011, p. B1.
D. Michaels and A. Cole, “Defense Contractors Resist Fixed-Price Jobs,” The Wall
Street Journal, December 14, 2009, p. B3.
S. Levy, “Secrets of Googlenomics: Data-Fueled Recipe Brews Profitability,” Wired
Magazine, May 22, 2009.
J. Lahart, “Economists Look at Ways to Structure Auctions,” The Wall Street Journal,
September 25, 2008, p. D1.
A. Gregor, “Auctions are Aiding Sales in a Weakened Market,” The New York Times,
June 28, 2008, p. C7.
D. Leonardt, “High Medicare Costs, Courtesy of Congress,” The New York Times,
June 25, 2008, pp. C1, C5.
S. Rubenstein, “Hospitals put Patients’ Debt up for Auction,” The Wall Street Journal,
June 3, 2008, pp. D1, D6.
Joe Nocera, “Open and Fair: Why Wall Street Hates Auctions,” The Wall Street
Journal, March 18, 2006, pp. B1, B12.
Robin Sidel, “Google IPO Tests Theories on Auctions,” The Wall Street Journal,
June 7, 2004, p. C1.
“In the Secret World of Airplane Deals, One Battle Up Close,” The Wall Street
Journal, March 10, 2003, p. A1.
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“Tales of Manipulation and Design Flaws from the Crypt of Auction History,” The
New York Times, August 1, 2002, p. C2.
“Revenge of the Nerds,” The Economist, July 23, 1994, p. 70. (Government
auctioneers take the advice of game theorists.)
“Without Competing Bids New York Pays the Price,” The New York Times,
February 19, 1991, p. A1.
Milton Friedman, “How to Sell Government Securities,” The Wall Street Journal,
August 28, 1991, Op Ed Page.
II. Longer Readings
W. Samuelson, “Auctions: Advances in Theory and Practice,” Chapter 13 in K.
Chatterjee and W. Samuelson (Eds.) Game Theory and Business Applications. New
York: Springer Academic Publishers, 2014.
P. Milgrom, “Putting Auction Theory to Work,” Cambridge University Press, 2004.
P. Bajari and A. Hortacsu, “Economic Insights from Internet Auctions,” Journal of
Economic Literature, 42, 2004, 457-486.
O. Ashenfelter and K. Graddy, “Auctions and the Price of Art,” Journal of
Economic Literature, 41, 2003, 763-787.
G. Hohner. et al, “Combinatorial and Quantity-Discount Procurement Auctions
Benefit Mars Inc. and its Suppliers,” Interfaces, January-February 2003, 23-35.
P. Klemperer, “What Really Matters in Auction Design,” Journal of Economic
Perspectives, 16, Winter 2002, 169-190.
Symposium on the Spectrum Auctions, Journal of Economics and Manage-ment
Strategy 6, 1997, 431-675.
R. P. McAfee and J. McMillan. “Analyzing the Airwaves Auctions.” Journal of
Economic Perspectives, Spring 1996, 159-176.
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J. H. Kagel, “Auctions: A Survey of Experimental Research.” in J. H. Kagel and A.
E. Roth (Eds.), The Handbook of Experimental Economics, Princeton NJ: Princeton
University Press, 1995.
S. Bikhchandani and C. Huang, “The Economics of Treasury Security Auctions,”
Journal of Economic Perspectives, Summer 1993, 117-134.
R. Forsythe, R.M. Isaac, and T.R. Palfrey, “Theories and Tests of ‘Blind Bidding in
Sealed-bid Auctions,” The RAND Journal of Economics, Summer 1989, 214-238.
R. H. Thaler, “The Winner’s Curse,” Journal of Economic Perspectives, Winter
1988, 191-202.
III. Cases
Bidding on Martha’s Vineyard (A) and (B) (9-908-044 and 9-908-045) Harvard
Business School, 2008.
Bidding for the Legacy Hotel (UVA-QA-0696) Darden School, University of
Virginia, 2007.
EBay, Inc. (B) (9-703-499) Harvard Business School, 2003.
Olympian Competition: Bidding for Olympic Television Rights (IB50) Stanford
Business School, 2003.
Travelexis.com (9-703-059, 9-703-060, 9-703-061) Harvard Business School, 2003.
(This competitive bidding exercise involves 3 separate roles and handouts.)
Bidding for Antamina. (9-297-054), Harvard Business School, 1997.
Teaching Note (5-298-102).
Pricing and Market Making on the Internet (9-500-065), Harvard Business School,
2000.
Fabtek (A) (9-592-095) and Fabtek (B) (9-592-096), Harvard Business School,
1992. Teaching Note (5-593-006).
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FairMarkets Inc.: Where Buyers and Sellers Connect. (9-399-006), Harvard
Business School, 1998.
The Great Engine War (Abridged) (#629.3), JFK School of Government. (This case
describes the competition between General Electric and Pratt and Whitney for $17
billion of fighter engine sales to the US Air Force.)
IV. Quips and Quotes
Everything is worth what its purchaser will pay for it.
A cynic is someone who knows the price of everything and the value of nothing.
(Oscar Wilde)
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