Fred wants to sell his car, after moving back to Blissville (where he is happy with the bus system). He decides to sell it to the first person to offer at least $15,000 for it. Assume that the offers...

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Fred wants to sell his car, after moving back to Blissville (where he is happy with the bus system). He decides to sell it to the first person to offer at least $15,000 for it. Assume that the offers are independent Exponential random variables with mean $10,000.

(a) Find the expected number of offers Fred will have.

(b) Find the expected amount of money that Fred will get for the car.

Answered Same DayDec 25, 2021

Answer To: Fred wants to sell his car, after moving back to Blissville (where he is happy with the bus system)....

Robert answered on Dec 25 2021

109 Votes

Let X = amount of random offer
P (X > 15000) = exp(−15000/β) = e−1.5 ≈ 0.223130 ≈ 0.223
Probability that a price exceeds threshold = P (X > 15000) = 0.223
Since these offers are independent, number of offers for first one to exceed thresh-
old is geometric random variable, with p = 0.233
Let Y...

SOLUTION.PDF

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Fred wants to sell his car, after moving back to Blissville (where he is happy with the bus system). He decides to sell it to the first person to offer at least $15,000 for it. Assume that the offers...

Answer To: Fred wants to sell his car, after moving back to Blissville (where he is happy with the bus system)....

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