You are competing for a contract in a second-price auction. Thecost for you to fulfill the contract is $10m. Check if each of thefollowing statements is true. If not, change the statement to makeit correct.
1. If with probability 0.4, the lowest cost of your competitorsis $6m and with probability 0.6, it is $15m. Then your expectedprofit from the auction is $1.4m.
2. (4 points) If one of your competitors can fulfill thecontract at cost $7m, then you are going to lose at least $3m.
3. (4 points) If 30% of chance that one of your competitors hasa cost below $6m, 30% of chance that all of them have a cost above$16m, and 40% of chance all of them have a cost somewhere between$8m and $11m. Then your expected profit is at least $1.8m.
4. (4 points) If all your competitors inflate their ask pricesabove their costs by 10%, then you will be worse if you do not doso.
