Condo construction Company is bidding on an important construction job. The job will cost $2.5 million to complete. One other company is also bidding for the job. Condo believes that the opponents bid is equally likely to be any amount between $3 and $5 million, that is, the opponents bid is uniformly distributed over the interval [$3 million, $5 million]. If Condo wants to maximize its expected profits, what should its bid be?
Suppose condo bids for x million dollars. x is between 3 and 5. Because its
component bid is equally distributed in [3,5], then its ...
The solution calculates the best bid a condo construction company should bid in order to maximize its expected profits.