Freemark Abbey Winery Case

Topics: Decision theory, Equals sign, Assignment Pages: 4 (1021 words) Published: September 3, 2013
Baur Bektemirov

BUSF 36106: Assignment 5

Freemark Abbey Winery
Assume that under no unusual circumstances (no storm), Jaeger sells 1,000 cases of Riesling. Consider different cases: 1. Jaeger harvests grapes in anticipations of storm. Then the total revenue will be equal to 12×1000×$2.85 = $34200. 2. Jaeger doesn’t harvest and there is no storm with 50% chance. 2.1. With 40% chance, sugar concentration is 25%, then the total revenue is 12 × 1000 × $3.50 = $42000 2.2. With 40% chance, sugar concentration is 20%, then the total revenue is 12 × 1000 × $3.00 = $36000 2.3. With 20% chance, sugar concentration is below 20%, then the total revenue is 12 × 1000 × $2.50 = $30000 3. There is storm with 50% chance 3.1. Storm causes botrytis mold with probability 40%, then the price will increase but the total quantity produced will decrease by 30%. The total revenue is equal to 12 × 1000 × 70% × $8.00 = $67200. 3.2. With 60% chance, storm results in swelling of the berries and the price for a bottle goes down, though the total production output increases by 7.5%. The total revenue is 12 × 1000 × 107.5% × $2.00 = $25800. We can calculate the expected outcome based on conditional probabilities of each case or we can build a decision tree with a “decision” node at the beginning and “chance” nodes on the branch corresponding to the decision of not harvesting. The optimal decision for Jaeger is not to harvest; the expected revenue is $39780.

Figure 1: Jaeger’s decision tree

Page 1

Baur Bektemirov

BUSF 36106: Assignment 5

Mega Pharma and Micro Pharma
In this analysis I use the following assumptions: i. If both MegaPharma and MicroPharma develop the drug, MicroPharma will sue with 100% chance (unless it sells the rights to MegaPharma or agree to sell the rights on the license). ii. MegaPharma believes that the sales will peak at $500 million regardless of MicroPharma’s own predictions. iii. Market for the compound in the USA is of the same size as Europe and...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Freemark Abbey Winery Case Study Essay
  • Freemark Abbey Winery Essay
  • Case on Freemark Abbey Winery Essay
  • Essay about Freemark Abbey Winery
  • Freemark Abbey Winery Essay
  • Case 21: Freemark Abbey Winery Essay
  • Essay on Freemark Abbey Case
  • Freemark Abbey Winery Research Paper

Become a StudyMode Member

Sign Up - It's Free
The Post HD 2017 | June 2015 | Rob Muller