I don't agree.
The second one says "because you're bidding b, you now think the distribution of the real value is uniform on [0,b]" which does not make sense. This is just a conditional expectation and no where in the question does it say that your assumption changes with your bid.
The...
Slight Confusion
For the treasure chest question, what is the expected value of your net profit? Is it
(
\frac{1}{1000} \int_0^b (1.5v - b) dv = - \frac{b^2}{4000}
)
or is it
(
\frac{1}{b} \int_0^b (1.5v - b) dv = - \frac{b}{4}
)
I think it's the first one but a friend of mine insists it's...
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