Question 457960: B.3. A plumbing contractor has the opportunity to bid on a contract to do the plumbing work for a new office building. After reviewing the blueprints and specifications, the contractor estimates that the job will cost $300,000. The possible bids the contractor might make and his estimates of the probability of winning the contract at each bid level are:
Bid Probability Win
$330,000 .90
$350,000 .75
$375,000 .50
$400,000 .25
$425,000 0
What should the contractor bid if he wishes to maximize his expected profits?
Answer by edjones(8007)   (Show Source):
You can put this solution on YOUR website! profit* prob = expected profit
30000 * .90 = 27000
50000 * .75 = 37500
75000 * .50 = 37500
100000* .25 = 25000
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Make the 50000 or 75000 bid.
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Ed
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