Property is for sale for $100,000
If the homeowner were to value the property at $95,000, the developer at $157,000 and the investor at $116,000 and the probability that the next property sold would be to a homeowner is 60%, a condo developer 20%, an investor 10% and 10% did not sell, then the expected value of the property would be $100,000 derived as follows:$100,000 = 95,000 * 60% + 157,000 * 20% + 116000 * 10% + 0 * 10%
- Homeowner: b(1)=84000, p(1)=70%
- Condo Developer: b(2)=148000, p(2)=20%
- Investor: b(3)=116000, p(3)=10%
- Did not sell: b(4)=0, p(4)=10%