Suppose we are interested in bidding on a piece of land and we know one other bidder
Question:
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 $9,900 will be accepted. Assume that the competitor's bid is a random variable that is uniformly distributed between $9,900 and $14,900.
a. Suppose you bid $12,000. What is the probability that your bid will be accepted (to 2 decimals)?
.42
b. Suppose you bid $14,000. What is the probability that your bid will be accepted (to 2 decimals)?
.82
c. What amount should you bid to maximize the probability that you get the property?
$ 14900
d. Suppose that you know someone is willing to pay you $16,000 for the property. You are considering bidding the amount shown in part (c) but a friend suggests you bid $12,950. Which bid will give you the
larger expected profit?
Bid $12950 to maximize the expected profit
What is the expected profit for this bid (to 2 decimals)?
Essentials Of Statistics For Business And Economics
ISBN: 9781305081598
7th Edition
Authors: David Anderson, Thomas Williams, Dennis Sweeney, Jeffrey Cam