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What bid would maximize your expected value

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Your local high school is having a fund-raising auction, at which one of these basketballs will be auctioned, in a "first-price" sealed-bid auction (in which the highest bidder wins and pays the price that he/she bid). You have decided that you are willing to pay a maximum of $100 for this basketball. You are certain that there will be only one other bidder, and your guess is that the other bidder's valuation of the basketball is between $60 and $180, with a uniform distribution on all values in between.

What bid would maximize your expected value from this auction? Explain why and how you decided on this bid.

Reference no: EM132519738

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