A company has a value v which is uniformly distributed between 0 and 1. You are planning to place a bid b for the company. If b is smaller than v, then your bid loses and you get nothing; if b is larger than v, you get to purchase the company at price b, and the company will end up being worth 1. 5 * v. What price b should you bid to maximize your profit?

Answers

Answer 1

Answer:

Therefore, if you bid 0.5, you can expect to win the company with probability 0.5 and pay 0.5 for it, for an expected value of 0.375. This is the maximum expected value you can achieve.

To maximize your profit, you should bid the expected value of v, which is 0.5. This is because, if you bid higher than the expectedvalue, the probability of winning the company will decrease, and if you bid lower, the probability of winning will increase, but the value of the company will be lower.

Here's how to calculate the expected value:

The probability of winning the company is given by the probability that v is less than b. Since v is uniformly distributed between 0 and 1, the probability that v is less than b is simply b.

The expected value of the company is given by the probability of winning the company multiplied by the value of the company if you win. Since the value of the company if you win is 1.5 * v, the expected value is given by:

Expected value = b * (1.5 * v)

Substituting the value of b = 0.5, we get:

Expected value = 0.5 * (1.5 * 0.5)

= 0.5 * 0.75

= 0.375

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Answers

Answer:

Ans. the cost of the meal was $130.4

Explanation:

Hi, ok, the credit card is charging a 21% APR this means that the cost is 0.21/12 = 0.0175 monthly and the cash advance is 3%, so the associated fees to this $125 purchase are:

Interest fee

$125*0.0175= $2.19

Cash Advance fee

$125*0.03= $3.75

And the meal was $125, so the total cost of the meal was:

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Best of luck.

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