# Question

A consultant knows that it will cost him $10,000 to fulfill a particular contract. The contract is to be put out for bids, and he believes that the lowest bid, excluding his own, can be represented by a distribution that is uniform between $8,000 and $20,000. Therefore, if the random variable X denotes the lowest of all other bids (in thousands of dollars), its probability density function is as follows:

a. What is the probability that the lowest of the other bids will be less than the consultant's cost estimate of $10,000?

b. If the consultant submits a bid of $12,000, what is the probability that he will secure the contract?

c. The consultant decides to submit a bid of $12,000.

What is his expected profit from this strategy?

d. If the consultant wants to submit a bid so that his expected profit is as high as possible, discuss how he should go about making this choice.

a. What is the probability that the lowest of the other bids will be less than the consultant's cost estimate of $10,000?

b. If the consultant submits a bid of $12,000, what is the probability that he will secure the contract?

c. The consultant decides to submit a bid of $12,000.

What is his expected profit from this strategy?

d. If the consultant wants to submit a bid so that his expected profit is as high as possible, discuss how he should go about making this choice.

## Answer to relevant Questions

The ages of a group of executives attending a convention are uniformly distributed between 35 and 65 years. If the random variable X denotes ages in years, the probability density function is as follows: a. Graph the ...An analyst forecasts corporate earnings, and her record is evaluated by comparing actual earnings with predicted earnings. Define the following: actual earnings = predicted earnings + forecast error. If the predicted ...It is estimated that amounts of money spent on gasoline by customers at a gas station follow a normal distribution with a standard deviation of $2.50. It is also found that 10% of all customers spent more than $25. What ...A management consultant found that the amount of time per day spent by executives performing tasks that could be done equally well by subordinates followed a normal distribution with a mean of 2.4 hours. It was also found ...A random sample of 16 junior managers in the offices of corporations in a large city center was taken to estimate average daily commuting time for all such managers. Suppose that the population times have a normal ...Post your question

0