Suppose we are interested in bidding on a piece of land and weknow one other bidder is interested. The seller announced that thehighest bid in excess of $10,000 will be accepted. Assume that thecompetitor’s bid x is a random variable that is uniformlydistributed between $10,000 and $15,000.
a. Suppose you bid $12,000. What is the probability that yourbid will be accepted?
b. Suppose you bid $14,000. What is the probability that yourbid will be accepted?
c. What amount should you bid to maximize the probability thatyou get the property?
d. Suppose you know someone who is willing to pay you $16,000for the property. Would you consider bidding less than the amountin part (c)? Why or why not?
Suppose we are interested in bidding on a piece of land and we know one other bidder is interested. The seller announced
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