Microsoft® Excel® 2010: Data Analysis and Business Modeling

Chapter 70. Calculating an Optimal Bid

Questions answered in this chapter:

• How do I simulate a binomial random variable?

• How can I determine whether a continuous random variable should be modeled as a normal random variable?

• How can I use simulation to determine the optimal bid for a construction project?

When bidding against competitors on a project, the two major sources of uncertainty are the number of competitors and the bids submitted by each competitor. If your bids are high, you’ll make a lot of money on each project, but you’ll get very few projects. If your bids are low, you’ll work on lots of projects but make very little money on each one. The optimal bid is somewhere in the middle. Monte Carlo simulation is a useful tool for determining ...