An information system consultant is bidding on a project


An information system consultant is bidding on a project that involves some un- certainty. Based on past experience, if all went well (probability 0.1), the project would cost $1.2 million to complete. If moderate debugging were required (probability 0.7) the project would probably cost $1.4 million. If major problems were encountered (probability 0.2) the project could cost $1.8 million. Assume that the firm is bidding competitively and the expectation of successfully gaining the job at a bid of $2.2 million is 0, at $2.1 million is 0.1, at $2.0 million is 0.2, at $1.9 million is 0.3, at $1.8 million is 0.5, at $1.7 million is 0.8, and at $1.6 million is practically certain. a. Calculate the expected value for the given bids. b. What is the best bidding decision? c. What is the expected value of perfect information?

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Operation Management: An information system consultant is bidding on a project
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