- #31
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Yes we should. I got lazy.etotheipi said:
Expected Value: Bidding for a House
- Thread starter Master1022
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- Expected value Value
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SUMMARY
The discussion centers on the expected value of bidding for a house with a uniform price distribution between 0 and 1000. Participants analyze the profit formula, P = nV - B, where n represents the resale multiplier (e.g., n = 1.5) and B is the bid amount. The consensus is that bidding should not exceed 500n to ensure a positive expected profit, leading to a maximum bid of 750 when n = 1.5. Calculations reveal that bidding 750 results in a negative expected payout, indicating that this strategy is flawed.
PREREQUISITES- Understanding of expected value and profit calculations
- Familiarity with uniform distribution concepts
- Knowledge of probability theory, particularly in relation to bidding strategies
- Basic mathematical skills for integrating functions and evaluating expected outcomes
- Study the law of iterated expectations in probability theory
- Learn about marginalization techniques in probability distributions
- Explore advanced bidding strategies in auction theory
- Investigate the implications of different resale multipliers on bidding outcomes
Mathematicians, economists, real estate investors, and anyone interested in auction theory and decision-making under uncertainty.
- #32
etotheipi
I can hardly complain; I think one tiny bit of laziness is quite excused, given the rest of your excellent analysis and work on Excel 
. Thanks for taking the time to clarify! 
. Thanks for taking the time to clarify!