You and one other person are bidding on a parcel ofland. The seller says the hig

Question

You and one other person are bidding on a parcel ofland. The seller says the highest bid above $10,000 will bethe winner. Assume the competitor's bid X is a randomvariable that is uniformly distributed between $10,000 and$15,000. -Suppose you bid $14,000. What is the probability thatyour bid will be accepted. What amount should you bid to mazimize the probability thatyou will get the property? You and one other person are bidding on a parcel ofland. The seller says the highest bid above $10,000 will bethe winner. Assume the competitor's bid X is a randomvariable that is uniformly distributed between $10,000 and$15,000. -Suppose you bid $14,000. What is the probability thatyour bid will be accepted. What amount should you bid to mazimize the probability thatyou will get the property?

Explanation / Answer

Your bid will be accepted unless your competitor bids more than$14,000. That probability is 1000/5000 = .20 You have a probability of .80 of having your bid accepted. It seems that if you bid $15,000 you maximize the likelihood ofwinning the bid

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