It is uncertain as to what a competitor will bid on an upcoming contract to supply parts to Boeing. The bid is almost certain to be between $250,000 and $300,000.

a. Write the probability function, f(x), for this random variable. Is it a pmf or a pdf?

b. What are the average and standard deviation? What is the managerial interpretation of these?

c. What is the probability that the competitor’s bid will be less than $280,000?

d. What is the probability of a winning the bid if you bid $255,000?

e. Suppose your cost to fulfill the contract if you win is $245,000. What is the optimum bid?

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