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 First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

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Question

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)?

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