The Economics of Money, Banking and Financial Markets 4th Edition by Frederic Mishkin

Exercise 23

Use the fact that the expected value of an event is a probability weighted average, the sum of each possible outcome multiplied by the probability of the event occurring.
You are in the market for a used car and decide to visit a used car dealership. You know that the Blue Book value of the car you are looking at is between $20,000 and $24,000. If you believe the dealer knows as much about the car as you do, how much are you willing to pay? Why? Assume that you care only about the expected value of the car you will buy and that the car values are symmetrically distributed.