From the book. A house painter has a regular contract to work for a builder. On

Question

From the book. A house painter has a regular contract to work for a builder. On these jobs, her cost estimates are generally right - sometimes a little high, sometimes a little low, but correct on the average. When her regular work is slack, she bids competitively with other painters for other jobs. "Those are different, " she says, "they almost always end up costing more than I estimate." Suppose the jobs themselves aren't different in the sense of being harder to estimate. What's another explanation for the second kind of jobs usually costing more than she estimates?

Explanation / Answer

With either type of job, her estimates will sometimes be too high, and sometimes be too low. With the competitively-bid jobs, however, when her estimates happen to be too high, the customer will simply hire another painter, who by chance had a lower estimate. Therefore, she is only likely to have the lowest bid when she underbids, and so the sample of jobs she does on the weekend is selected. When she estimates costs for her salaried job, there is no selection, so her estimates on average are correct.

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.