Question: Gamma's objective is to select the bid that maximizes its expected profit. a. What is the optimal bid for Gamma to make? b. What is

Gamma's objective is to select the bid that maximizes its expected profit.

a. What is the optimal bid for Gamma to make?
b. What is the expected profit associated with the optimal bid in part (a)?
c. What is the risk profile for the optimal bid in part (a)?
d. Consider the probability of winning the optimal bid. If this parameter were allowed to vary, while all other parameters were kept unchanged, what values could it take without altering the optimal selection?

Bid Number Probability of Winning Amount of Bid TCC + 5% TCC + 10% TCC + 15% TCC + 20% TCC + 25% 0.80 0.70 0.50 0.30 0.20

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