D-Systems is considering bidding on a small defense contract. There are two phases in the bidding competition and the contract is awarded to the lowest qualified bidder, as follows:

• Phase I: submit a request to be qualified to bid. Preparation costs: $10,000, 50-50 chance to be invited for full bid in Phase II
• Phase II: if invited, can submit a full bid with price to the customer. D-System’s cost of doing  the work is $127K. They can bid $155K for work with 90% chance of winning the contract, or bid $170K with a 75% chance of winning, or bid $190K with a 35% chance of winning the bidding competition.

What should D-Systems do?

DTREE data:

D 1 2 BidI Submit Phase I request
D 1 7 NoBd Do not bid Phase I
E 2 3 0.5 Qual Phase I qualify for bidding in Phase II
E 2 8 0.5 NoQu Phase I not invited to bid
D 3 4 B155 Bid $155K
D 3 5 B170 Bid $170K
D 3 6 B190 Bid $190K
D 3 15 NoBd Do not bid Phase II
E 4 9 0.9 Win Win bid at $155K
E 4 10 0.1 Lose Lose bid at $155K
E 5 11 0.75 Win Win bid at $170K
E 5 12 0.25 Lose Lose bid at $170K
E 6 13 0.35 Win Win bid at $190K
E 6 14 0.65 Lose Lose bid at $190K
P 7 0
P 8 -10
P 9 13
P 10 -15
P 11 28
P 12 -15
P 13 48
P 14 -15
P 15 -10