Determine the optimal bid for a decision maker with an exponential u-function with a risk aversion coefficient, , a maximum competitive bid distribution, as a scaled Beta distribution, , and PIBP for the bidding item is $900.
1)Plot the Opposing forces of bidding (i.e. plot the CDF and the curve of [PIBP-bid])
2)Plot the value of the auction situation (certain equivalent) vs the bid amount.
3)Determine the least amount the decision maker needs to be paid in order to not participate in this bidding situation.
4)Plot a sensitivity analysis for the optimal bid vs. the risk aversion coefficient.
5)Plot a sensitivity analysis for value of bidding situation vs the risk aversion coefficient.
6)Extra Credit: Plot a two-way sensitivity analysis for optimal bid vs the two parameters (risk aversion coefficient and PIBP). This is a 3D plot.
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