HP is bidding against Lenovo for an order of 150 laptops. HP’s unit cost is $1,000 per laptop, and, based on previous experience, HP’s belief is that Lenovo’s bid will be uniformly distributed between $1,200 and $1,500 per unit.

a. Assuming that HP and Lenovo are at parity (e.g., neither supplier enjoys a premium on this deal), what is HP’s optimal price per unit to bid? What is HP’s corresponding probability of winning the bid and expected contribution?

b. Assume that Lenovo is an incumbent supplier to this customer and, as a result, HP believes that Lenovo enjoys a $200 per unit premium for this deal. Assuming that HP has the same distribution on Lenovo’s bid as previously stated, what is HP’s optimal price per unit to bid? What is HP’s corresponding probability of winning the bid and its expected contribution?