School of Business

The dean of the School of Business at Northern Connecticut State University has been approached by a government agency in Hunan Province, China, to provide MBA training to a group of 30 midlevel officials. The dean is considering submitting a bid of $225,000, $250,000, or $300,000 for providing this program. If the bid is $225,000, the dean estimates there is a 90% chance that the school will get the contract. This probability decreases to .60 if the bid is $250,000 and .20 if the bid is $300,000. Materials are expected to cost an average of $1000 per participant. The dean estimates that she will have to pay total faculty salaries of either $180,000 or $220,000. There is a 40% chance that the faculty union will accept $180,000 and a 60% chance that the union will hold out for $220,000. Using a decision tree approach, determine the dean’s optimal strategy.