What is one method to generate values for the bid amount?

• A. Directly sample from the 280 bid amount observations
• B. Fit a normal distribution to the bid data
• C. Use the median of the bid amounts
• D. Use a fixed bid amount

Answer: (C)

When generating a bid amount for a Monte Carlo run, using a robust central measure helps you reflect a typical bid without being pulled by extreme values. The median is the middle value of the observed bids, so half of the bids are below and half above. It’s less sensitive to outliers than the mean, which makes it a stable, representative bid for scenario analysis.

This approach gives you a simple, defensible input that captures central tendency without assuming a specific distribution shape. In contrast, directly sampling from the observed bids would rely on the full empirical distribution and can be more complex to implement in some cases. Fitting a normal distribution imposes symmetry and may misrepresent skewness in bid data. Using a fixed bid amount provides no variation, which defeats the purpose of a Monte Carlo analysis.