Problem 3 Simulation (35 points) Auto dealer Ais attending an auction which sells luxury cars. His objective is to purchase a used luxury car, perform a necessary service on it and sell it, hop in the process. The bidding is going on for a one year old full size luxury car, which was used a Auto dealer estimates that the competing bid will follow normal distribution with a mean of $28, Dealer A also estimates that the selling price for such a car will depend on the economy. In case of a recesion, the estimated selling price is $36,000. On the other hand, if the economy It is estimated that the likelihood of economy remaining in a recesion is approximatelly 50%. Dealer A also collected some data on additional costs (including taxes, transportation and servi second hand cars ready for sale. S N Sample of additional cost (taxes+transportation+ service) for similar cars: 1 $3,000 2 $4,000 3 $3,400 4 $4,400 5 $5,800 6 $3,600 $3,600 8 $6,000 7 Suggested setup for changing cells follows: bid by A additional cost competing bid selling price profit a) The dealer A is considering the bid of $36,000. Simulate this bid and comment whethe Hint; model selling price using random number, additional cost by use of sampling disti and the competitive bid by using normal distribution. Is $36000 a good bid? What is the probability of loosing money? b) Run parametric simulation with the following bid values: 28,000 30,000 32,000 34,000 What can you conclude from your results? Advice on bidding amount. Justify your ans Problem 3 Simulation (35 points) Auto dealer Ais attending an auction which sells luxury cars. His objective is to purchase a used luxury car, perform a necessary service on it and sell it, hop in the process. The bidding is going on for a one year old full size luxury car, which was used a Auto dealer estimates that the competing bid will follow normal distribution with a mean of $28, Dealer A also estimates that the selling price for such a car will depend on the economy. In case of a recesion, the estimated selling price is $36,000. On the other hand, if the economy It is estimated that the likelihood of economy remaining in a recesion is approximatelly 50%. Dealer A also collected some data on additional costs (including taxes, transportation and servi second hand cars ready for sale. S N Sample of additional cost (taxes+transportation+ service) for similar cars: 1 $3,000 2 $4,000 3 $3,400 4 $4,400 5 $5,800 6 $3,600 $3,600 8 $6,000 7 Suggested setup for changing cells follows: bid by A additional cost competing bid selling price profit a) The dealer A is considering the bid of $36,000. Simulate this bid and comment whethe Hint; model selling price using random number, additional cost by use of sampling disti and the competitive bid by using normal distribution. Is $36000 a good bid? What is the probability of loosing money? b) Run parametric simulation with the following bid values: 28,000 30,000 32,000 34,000 What can you conclude from your results? Advice on bidding amount. Justify your ans
