Bets and decisions · Auctions · difficulty 2 of 5
Shading the bid
In a sealed-bid auction, an item is worth $80 to you. Your only rival bids an amount uniformly distributed between $0 and $100, which you can't see. The higher bid wins and pays its own bid; the loser pays nothing. You bid $40. What is your expected profit, in dollars?
Answer with an expected value. First lock in a gut guess with an 80% range, then solve it properly, then watch a simulation settle on the truth.
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