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Mr. Joe sells newspaper and experiences a daily demand uniformly distributed over a certain interval (a,b). He buys his newspapers at a price of
Mr. Joe sells newspaper and experiences a daily demand uniformly distributed over a certain interval (a,b). He buys his newspapers at a price of $x per paper and sells them at the price of $ 1.5. At the end of the day, any remaining papers are returned to a recycling center of a salvage value of $ 0.2 per paper. Joe has a good estimate of his average daily demand and never took stochastic modeling class. So, he has decided to buy a number of papers every morning that is equal to this average demand. What must be the purchasing price x for Mr.Joe in order for him to be luck out and maximize his expected daily profit under his current practice?
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