Bulloch County has never allowed liquor to be sold in
restaurants. However, in three months, county residents are
scheduled to vote on a referendum to allow liquor to be sold by the
drink. Currently, polls indicate there is a 60% chance that the
referendum will be passed by voters. Phil Jackson is a local real
estate speculator who is eyeing a closed restaurant building that
is scheduled to be sold at a sealed bid auction. Phil estimates
that if he bids $1.25 million, there is a 25% chance he will obtain
the property; if he bids $1.45 million, there is a 45% chance he
will obtain the property; and if he bids $1.85 million, there is an
85% chance he will obtain the property. If he acquires the property
and the referendum passes, Phil believes he could then sell the
restaurant for 5.2 million. However, if the referendum fails, he
believes he could sell the property for only $1.15 million. Develop
a decision tree for this problem. What is the optimal decision
according to the EMV criterion?