Decision Analysis Case Study

FREEMARK ABBEY WINERYKhurram Masood’s section

HLCC Consulting Inc.Julian HongNicolas Liao Alan Chen Cheng-Chieh Chao

Decision Basis Information

Probability of rain, mold formation, acidity, sugar level, wine price, reputation value, detector accuracy, spores effectiveness, immigration law

Mr. Jaeger’s Alternatives Harvest now or later Use detector or not Buy spores or not Sell in bottle or bulk

Mr. Jaeger’s Preferences Prefers more money than less Cares about reputation

Uncertainties Probability of rain, mold formation, acidity, sugar level

Harvest/ Not harvest

Value $

Rain/No Rain

Acidity Level

Sugar Level

Botrytise/Thin wine

Bottle/Not Bottle

Detector/No Detector

Spores/No Spores

Immigration Law Passed/Failed

DetectorPrediction

Decision Diagram

Do Not Rent Weather Detector

Buy Spores

Do Not Buy Spores

Harvest Later

Harvest NowImmigration LawPassed

Immigration LawFailed

Rain

No Rain

Mold Develops

No Mold

LowAcidity

NormalAcidity

>= 25% Sugar< 25% Sugar

Mold Develops

Mold DevelopsSell Wine In Bulk

Sell Wine Case

Immigration LawPassed

Immigration LawFailed

LowAcidity

NormalAcidity

>= 25% Sugar< 25% Sugar

Immigration LawPassed

Immigration LawFailed

Rain

No Rain

LowAcidity

NormalAcidity

>= 25% Sugar

< 25% Sugar

Immigration LawPassed

Immigration LawFailed

LowAcidity

NormalAcidity

>= 25% Sugar< 25% Sugar

No Mold

Mold DevelopsSell Wine In Bulk

Sell Wine Case

Decision Tree

Rent WeatherDetector

SaysRain

Buy Spores

Do Not Buy Spores

Harvest Later

Harvest NowImmigration LawPassed

Immigration LawFailed

Rain

No Rain

Mold Develops

No Mold

LowAcidity

NormalAcidity

>= 25% Sugar

< 25% Sugar

Mold Develops

Mold DevelopsSell Wine In Bulk

Sell Wine Case

Immigration LawPassed

Immigration LawFailed

LowAcidity

NormalAcidity

>= 25% Sugar

< 25% Sugar

Immigration LawPassed

Immigration LawFailed

Rain

No Rain

LowAcidity

NormalAcidity

>= 25% Sugar

< 25% Sugar

Immigration LawPassed

Immigration LawFailed

LowAcidity

NormalAcidity

>= 25% Sugar

< 25% Sugar

No Mold

Mold DevelopsSell Wine In Bulk

Sell Wine Case

SaysNoRain

Buy Spores

Do Not Buy Spores

Harvest Later

Harvest NowImmigration LawPassed

Immigration LawFailed

Rain

No Rain

Mold Develops

No Mold

LowAcidity

NormalAcidity

>= 25% Sugar

< 25% Sugar

Mold Develops

Mold DevelopsSell Wine In Bulk

Sell Wine Case

Immigration LawPassed

Immigration LawFailed

LowAcidity

NormalAcidity

>= 25% Sugar

< 25% Sugar

Immigration LawPassed

Immigration LawFailed

Rain

No Rain

LowAcidity

NormalAcidity

>= 25% Sugar

< 25% Sugar

Immigration LawPassed

Immigration LawFailed

LowAcidity

NormalAcidity

>= 25% Sugar

< 25% Sugar

No Mold

Mold DevelopsSell Wine In Bulk

Sell Wine Case

Delay the harvest and buy spores, but at a probability of rain greater than 45%, use the detector

Sensitivity to Probability of Rain

0

10000

20000

30000

40000

50000

60000

70000

80000

0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00

Probability of Rain

Rev

enu

e

No Detector, Harvest Now No Detector, Delay Harvest, Buy Spores

No Detector, Delay Harvest, No Spores Use Detector, Harvest Now

Use Detector, Delay Harvest, Buy Spores Use Detector, Delay Harvest, No Spores

RainNo rain

Use the detector, delay the harvest, but if the probability of spores exceeds 85.6%, do not buy the spores

Sensitivity to Probability of Mold

0

10000

20000

30000

40000

50000

60000

70000

0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00

Probability of Mold

Rev

enu

e

No Detector, Harvest Now No Detector, Delay Harvest, Buy Spores

No Detector, Delay Harvest, No Spores Use Detector, Harvest Now

Use Detector, Delay Harvest, Buy Spores Use Detector, Delay Harvest, No Spores

MoldNo mold

Regardless of the probability of low acidity, always use the detector, harvest later, and buy spores.

Sensitivity to Probability of Low Acidity

0

10000

20000

30000

40000

50000

60000

0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00

Probability of Low Acidity

Rev

enue

No Detector, Harvest Now No Detector, Delay Harvest, Buy Spores

No Detector, Delay Harvest, No Spores Use Detector, Harvest Now

Use Detector, Delay Harvest, Buy Spores Use Detector, Delay Harvest, No Spores

No turning point!

Regardless of sugar probability, always use the detector, delay harvest, and buy spores.

No turning point!

Sensitivity to Probability of >=25% Sugar

0

10000

20000

30000

40000

50000

60000

0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00

Probability of >=25% Sugar

Rev

enu

e

No Detector, Harvest Now No Detector, Delay Harvest, Buy Spores

No Detector, Delay Harvest, No Spores Use Detector, Harvest Now

Use Detector, Delay Harvest, Buy Spores Use Detector, Delay Harvest, No Spores

Regardless of immigration probability, always use the detector, delay the harvest, and buy the spores.

Sensitivity to Probability of Immi. Law Pass

0

10000

20000

30000

40000

50000

60000

0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00

Probability of Immi. Law Pass

Rev

enu

e

No Detector, Harvest Now No Detector, Delay Harvest, Buy Spores

No Detector, Delay Harvest, No Spores Use Detector, Harvest Now

Use Detector, Delay Harvest, Buy Spores Use Detector, Delay Harvest, No Spores

No turning point!

Value of the superDoppler (Perfect Information) The value of the detector is

$6874.64; thus it is worth anything up until this point

Value of Mr. Borz’s Spores (Control) The value of the spores is:

$22400.93; thus it is worth anything up until this point