00:01
All right, so you're bidding on a piece of land and someone else is bidding on the same piece of land, and you know that that competitor's bid is going to be between 10k, $10 ,000, and $15 ,000, which i'm just abbreviating as k for the time being.
00:21
First off, you need to find the probability that our bid of $12 ,000 will be accepted.
00:30
In this case, because the highest bid is accepted, we need to figure out the probability.
00:35
That the competitor's bid is between 10 ,000 and our bid of 12 ,000.
00:44
Technically, this equal -than -sign on the less -than -than -sign could be just a less -than -sign, but it's just one point.
00:54
It won't change anything.
00:57
And instead of writing out all the math of the distribution, i'm going to do this by saving us some time.
01:06
We know that the distribution is going to look something like this.
01:13
With our probability here, and this is 10 ,000, and this is 15 ,000.
01:23
Now, if we just look at this geometrically, we know that this is 12 ,000 here, and we're only looking for this area, that's two -fifths of the entire area of this rectangle.
01:38
So this probability is two -fiths or 0 .4.
01:42
Now we need to find the probability that our bit of 14k will be accepted.
01:49
So same principle...