Which statement about bid amount generation is false?

Which statement about bid amount generation is false?

• A. It can be generated by directly sampling from the 280 bid amount observations
• B. It can be generated by sampling from a distribution fitted to the data
• C. It can be drawn from the 280 observed bid values
• D. It is unrelated to the observed bid amounts

Answer: (D)

Bid amount generation in Monte Carlo analysis relies on using information from actual data or a model based on that data. You can generate bids by directly sampling from the 280 observed bid amounts, which uses the empirical distribution of bids and keeps the real spread and skew you saw in the data. You can also fit a probability distribution to those data and then sample from that fitted distribution, capturing the same characteristics (mean, variance, shape) without copying each observation verbatim. Drawing from the 280 observed bid values (the empirical approach) is another way to do this, often via resampling with replacement to create many simulated bids. Saying bid amounts are unrelated to the observed bids would mean ignoring the data that define the uncertainty you’re trying to model, which defeats the purpose of the simulation.

Bid amount generation in Monte Carlo analysis relies on using information from actual data or a model based on that data. You can generate bids by directly sampling from the 280 observed bid amounts, which uses the empirical distribution of bids and keeps the real spread and skew you saw in the data. You can also fit a probability distribution to those data and then sample from that fitted distribution, capturing the same characteristics (mean, variance, shape) without copying each observation verbatim. Drawing from the 280 observed bid values (the empirical approach) is another way to do this, often via resampling with replacement to create many simulated bids. Saying bid amounts are unrelated to the observed bids would mean ignoring the data that define the uncertainty you’re trying to model, which defeats the purpose of the simulation.