Question

3. At an oral auction for a lamp, half of all bidders have a value of $50 and half have a value of $70. What is the expected winning bid if there are four bidders

Answer 1

Answer: $60

Explanation:

From the question, we are informed that At an oral auction for a lamp, half of all bidders have a value of $50 and half have a value of $70.

The expected winning bid if there are four bidders goes thus:

Since there are four bidders, the probability that the winning bid is $50 is 1/2 and for $70, it's 1/2 as well based on the question.

The expected winning bid will now be:

= ($50 × 1/2) + ($70 × 1/2)

= ($50 × 0.5) + ($70 × 0.5)

= $25 + $35

= $60