Bid Problem: A contractor is trying to decide how much bid on an upcoming job. The contractor can submit a high, average, or low bid. The size of the bid impacts the likelihood of winning and the expected contractor profit. Payoff Matrix ($000) Bid Result Win Lose High 110 -15 Average 75 Low 25 -15 -15 The number of potential bidders also impacts the probability of winning. Overall, 45% of the time the contractor faces >10 competitors on a bid and 55% of the time fewer than 10 competitors. Probability (Winning|# Bidders & Bid Level) Probability < 10 Bidders > 10 Bidders High 0.15 0.05 Average 0.3 0.15 Low 0.5 0.35 The contractor tries to estimate the number of potential bidders on any job by using a field engineer to track the number of sets of contract documents checked out of the AGC plan room. When there were >10 bidders, >20 sets of plans were checked out 65% of the time. When there were < 10 bidders, > 20 sets of plans were checked out 25% of the time. It usually requires about $800 of the engineer's time to track the activity in the AGC plan room. Part I Part II Draw an influence diagram for this situation Remember ID is about identifying the decision, uncertainties, and relationships between them Draw a decision tree for this situation Remember DT is about the sequence in which the decision context will unfold. Which bid should the contractor submit (high, average, low)? Should the contractor use the field engineer to try to estimate the number of competitors?