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 $10,000 will be accepted. Assume that the competitor's bid x is a random variable that is uniformly distributed between $10,000 and $15,000. If required, round your answers to two decimal places. a. Suppose you bid $12,000. What is the probability that your bid will be accepted (to 2 decimals)?

Answer 1

P(bid accepted) = 0.4

Explanation:

Defining the probability function of the competitor's bid as

`P(B<x)=(1)/(5000) *(x-10000)`

for x between 10000 and 15000

We can calculate the probability that our bid of $12,000 is accepted as

`P(B<x)=(1)/(5000) *(12000-10000)=2000/5000=0.4`