SOLUTION: Sun wants to sell an antique chair. She is thinking about selling the chair in an online auction. Sun estimates that the probability that she will get $100 for the chair is 25%, th

Question 614190: Sun wants to sell an antique chair. She is thinking about selling the chair in an online auction. Sun estimates that the probability that she will get $100 for the chair is 25%, the probability that she will get $200 is 40%, and the probability that she will get $600 is 35%.
However, an antique dealer in Sun�s neighborhood has offered her $250 for the chair.
If Sun wants to maximize her expected payment, should she sell the chair online, or sell it to the dealer? Explain.
Answer by stanbon(75887) (Show Source): You can put this solution on YOUR website!
Sun wants to sell an antique chair. She is thinking about selling the chair in an online auction. Sun estimates that the probability that she will get $100 for the chair is 25%, the probability that she will get $200 is 40%, and the probability that she will get $600 is 35%.
However, an antique dealer in Sun�s neighborhood has offered her $250 for the chair.
If Sun wants to maximize her expected payment, should she sell the chair online, or sell it to the dealer? Explain.
------------------------------
Expected payment = 0.25*100 + 0.40*200 + 0.35*600 = $315.00
----
She should sell online.
Cheers,
Stan H.
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