Check My Work eBook Suppose we are interested in bidding on a plece of land an t

Question

Check My Work eBook Suppose we are interested in bidding on a plece of land an that is unifonly distributed between $10,200 and $15,000. a. Suppose you bid 812,000. What is the probability that your bld will be aucepted (to 2 decimals)? d wc know one other bidder is intorested. The seller announoed that the highest bid in excess of $10,200 will be accepted. Assume that the competitor's bid z is a random vanable .38 b. Suppose you bid $14,000. What is the probability that your bid will be accepted (to 2 decimals)? .79 c. What amount should you bid to maximize the probability that you get the property? s 15000 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 $13,100. If your objective is to maximize the expected profit, what 1 is your bd? Did13 100 to maximize the expected profit What is the expected profit for this bid (to 2 decimals)? Hide Feedback Partially Correct

Explanation / Answer

Answer to the question is as follows:

a. P(bid accepted at 12000) = (12000-10200)/(15000-10200) = .375

b. P(bid accepted at 14000) = (14000-10200)/(15000-10200) = 0.792

c. P( bid accepted at x) = 1, so, x-10200/ 15000 - 10200 = 1, x = 15000

d. Expected profit = Reevenue from selling the property - Cost of bid= 16000 - x, to maximize xpected profit, bid lowest i.e. 13100

e. Expected profit = 16000-13100 = $2900 is expected profit

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