Extra Problem 7 - Sensitivity Analysis - Solution Key

Extra Problem 7 - Sensitivity Analysis - Solution Key -...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: EMGT 269 Elements of Problem Solving and Decision Making Instructor: Dr. J. Rene van Dorp 1 EXTRA PROBLEM 7: SENSITIVITY ANALYSIS Low (1-p-q) High (p) 10.3 Medium (q) 5 Final Court Decision Accept $3 Billion Refuse Low (1-p-q) High (p) 10.3 Medium (q) 5 Final Court Decision 5 2 Max Result 3 Accept $2 Billion Counteroffer $5 Billion Texaco Accepts $5 Billion (0.17) Texaco Refuses (0.50) Counteroffer Texaco Counter - offers $3 Billion (0.33) EMGT 269 Elements of Problem Solving and Decision Making Instructor: Dr. J. Rene van Dorp 2 A. Create a two-way sensitivity graph that shows optimal strategies for Liedtke for all possible values of p and q Strategy A = Accept $2 billion. Strategy B = Counteroffer $5 billion, then refuse if Texaco offers $3 billion. Strategy C = Counteroffer $5 billion, then accept if Texaco offers $3 billion. EMV(A) = 2 EMV(B) = 0.17 (5) + 0.5 [ p 10.3 + q 5 + (1- p- q ) 0] + 0.33 [ p 10.3 + q 5 + (1- p- q ) 0] = 0.85 + 8.549 p + 4.15 q ....
View Full Document

Page1 / 8

Extra Problem 7 - Sensitivity Analysis - Solution Key -...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online