What is the output measure of interest in the simulation model?

• A. Whether Land Shark wins the auction.
• B. The net return if Land Shark wins.
• C. Whether Land Shark wins the auction and its net return.
• D. The number of bids submitted.

Answer: (C)

The main idea is that the output measure of interest should reflect the actual performance you care about across all possible outcomes, combining both the chance of an event and its financial consequence. In this auction scenario, you don’t just want to know whether Land Shark wins or what the payoff would be if it wins; you need both pieces together so you can compute the overall expected net return and assess risk. Therefore, the best output measure is the one that includes whether Land Shark wins the auction and its net return, enabling complete evaluation across all simulation runs. Focusing only on win status ignores the payoff, and focusing only on payoff when you win ignores the probability of losing; the number of bids alone doesn’t reflect the financial result.