Refer to Exercise 53.

The consultant believes that the probability is .7 that a bid for the first contract would be accepted and 4 that a bid for the second contract would be accepted. He also believes that the acceptance of one bid is independent of acceptance of the other.

(a) What are the probabilities for the four states of nature?

(b) According to the expected monetary value criterion, which action should the consul- tant adopt, and what is the expected monetary value of this action?

(c) Draw the decision tree for the consultant's problem.

(d) What is the expected value of perfect information to this consultant?

(e) The consultant is offered "inside information" on the prospects of the bid for the first contract. This information is entirely reliable, in the sense that it would allow him to know for sure whether the bid would be accepted. However, no further information is available on the prospects of the bid for the second contract. What is the expected value of this "inside information"?