Q1

Decision
A Material costs Decrease Same Increase
Housing 100 70 30
Shopping 120 105 20
Lease 60 60 60

Decision
B Material costs Decrease Same Increase
Housing 20 35 30
Shopping 0 0 40
Lease 60 45 0

C Max Regret 35
Max
100
120
60

Max Regret
35
40
60
Competitors
Bids Prob The lowest bid is expected to w
A 2 0.1 however, the winner gets the
S 2.5 0.2 In order
the to discourage
winner bidders
gets $1 million less
M 3 0.1 lowest bid.
R 3.5 0.3
4 0.15
5 0.15

E Bid
1.9
2.4
2.9
3.4
4.9

Cost 2.4

Payoffs Lowest of the 4 Bids

2 2.5 3 3.5 4
My Bid 1 1.25 1.5 1.75 2
1.9 -0.4 0.1 0.6 1.1 0.6
2.4 0 0.1 0.6 1.1 1.6
2.9 0 0 0.6 1.1 1.6
3.4 0 0 0 1.1 1.6
4.9 0 0 0 0 0

A
Regret Lowest of the 4 Bids
2 2.5 3 3.5 4
1 1.25 1.5 1.75 2
1.9 0.4 0 0 0 1
2.4 0 0 0 0 0
2.9 0 0.1 0 0 0
3.4 0 0.1 0.6 0 0
4.9 0 0.1 0.6 1.1 1.6

Bid 2.9

B Max Regret 0.1

C and D Lowest of the 4 Bids

2 2.5 3 3.5 4
 1 1.25 1.5 1.75 2
1.9 -0.4 0.1 0.6 1.1 0.6
2.4 0 0.1 0.6 1.1 1.6
2.9 0 0 0.6 1.1 1.6
3.4 0 0 0 1.1 1.6
4.9 0 0 0 0 0

Cumulative P 0.3439 0.7599 0.8704 0.9919 0.999494

Prob 0.3439 0.416 0.1105 0.1215 0.007594
The lowest bid is expected to win in the tendering process;
however, the winner gets the contract for the second lowest bid.
In order
the to discourage
winner bidders
gets $1 million less from submitting
than the second absurd bids,the winner’s bid is less than half of the second
bid, in case
lowest bid.

5
2.5
1.6
1.6
2.6
2.6
2.6

5
2.5 Max
1 1
1 1
0 0.1
0 0.6
0 1.6

5
 2.5 E(payoffs)
1.6 0.10935625
1.6 0.25451
2.6 0.21341625
2.6 0.14711625
2.6 0.00131625

1
0.00050625
the second
 Cost 600000
SP 650000

Scenario %age Repair Cost

Good 80% 25000
Bad 20% 120000

Payoffs Good Bad

Decision Buy 25000 -70000
Not Buy 0 0

A Good Bad Max

Buy 0 70000 70000
Not Buy 25000 0 25000

NotBuy 0 Profits

B Good Bad E(Payoffs)

Buy 25000 -70000 6000
Not Buy 0 0 0

Buy 6000 Profits

C
Payoofs E(payoffs)
Good 25000 20000
0.8
EVPI
14000
0.2
Bad 0

D Buy the offer 40000

Good Bad E(P)

Buy -2500 10000 0
Not Buy -40000 -40000 -40000
G

B
 Demand 10000 per month

Mkt Share Prob A B

20% 30% -10000 -15000
30% 50% -4000 2000
50% 20% 14000 18000

A Prob 30% 50% 20%

Option Mkt Share -> 20% 30% 50%
A -10000 -4000 14000
B -15000 2000 18000

20% 30% 50%

A 0 6000 4000
B 5000 0 0

Method B
max Regret 5000

B 9 out of 25 persons

20% 30% 50%

A -10000 -4000 14000
B -15000 2000 18000
Prob 0.10056861 0.76078404 0.13864735

P (9 saying they'll buy) 0.088 2042975

P (Market Share 20% | 9 saying they'll buy) 0.10056861
P (Market Share 30% | 9 saying they'll buy) 0.76078404
P (Market Share 50% | 9 saying they'll buy) 0.13864735

Method b
EMV 2508.6911

obj
Part C x out of 25 persons 5 147.28114

20% 30% 50%

A -10000 -4000 14000
B -15000 2000 18000
 Prob 0.53154489 0.46559258 0.00286252

P (9 saying they'll buy) 0.111

P (Market Share 20% | 9 saying they'll buy) 0.53154489
P (Market Share 30% | 9 saying they'll buy) 0.46559258
P (Market Share 50% | 9 saying they'll buy) 0.00286252

Minimum Person 5

Part D
X A B Prob
-7137.74393 -6990.46279 0.111
0 0.00120043
1 0.00780213
2 0.02494722
3 0.05288411
4 0.08469542
5 0.11062947
6 0.1236426
7 0.12171458
8 0.10769105
9 0.08782772
10 0.06883442
11 0.05454939
12 0.04473588
13 0.03682191
14 0.02869479
15 0.02014923
16 0.01235506
17 0.00648702
18 0.00287287
19 0.00105681
20 0.00031684
21 7.54158E-05
22 1.37103E-05
23 1.78821E-06
24 1.49014E-07
25 5.96051E-09
Expected
-2200
100

max
6000
5000

Expected Profits
-2107.75946
2508.6911

Expected Profits
-7137.74393
-6990.46279
Profits E value with Info E value without Info
459.2315 100
-9664.73303
0 EVSI
0 359.2315
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0