Suppose we are interested in bidding on a piece of land and we know one other bidder is interested. The seller announced that the highest bid in excess of $10,500 will be accepted. Assume that the competitor's bid (x) is a random variable that is uniformly distributed between 10,500 and 15,500.
Suppose we are interested in bidding on a piece of land and we know one other bidder is interested. The seller announced that the highest bid in excess of $10,500 will be accepted. Assume that the competitor's bid (x) is a random variable that is uniformly distributed between 10,500 and 15,500.
a. Suppose you bid 12,000. What is the probability that your bid will be accepted (to 2 decimals)?
b. Suppose you bid 14,000. What is the probability that your bid will be accepted (to 2 decimals)?
c. What amount should you bid to maximize the probability that you get the property?
$
d. Suppose that you know someone is willing to pay you 16000 for the property. You are considering bidding the amount shown in part (c) but a friend suggests you bid 13,500. Which bid will give you the larger expected profit?
D (1) What is the expected profit for this bid (to 2 decimals)?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
