Solve Decision Tree for a bidding problem | Bid High or Low

This video shows how to solve a Bid High or Low problem using Decision Tree. 00:00 Question to solve 00:56 Decision Tree - High Bid 02:22 Low Bid 03:25 Complete Tree Problem: Company A is deciding whether to place a high bid of $18 million or a low bid of $12 million for leasing rights to a mining site. A major competitor (Company B) is also bidding for the same leasing rights. There is a 0.2 probability that Company B will place a $15 million bid and a 0.8 probability that they will place a $9 million bid. Preliminary examination of the site indicates a 0.20 probability of large deposits with net returns of $140 million, a 0.32 probability of moderate deposits with $50 million net returns, and a 0.48 probability of no deposits. The company that wins the bid will incur additional $10 million in extraction costs. a) How should Company A bid? b) What is the expected value of the decision? References: Spreadsheet Modeling and Decision Analysis: A Practical Introduction to Business Analytics, Cliff T. Ragsdale, Cengage Learning, 2017 Sensitivity Analysis in Decision Analysis: https://youtu.be/ybz5AAlyrLk