Extra Problem 7 - Sensitivity Analysis

# Extra Problem 7 - Sensitivity Analysis - Billion and then...

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EMGT 269 - Elements of Problem Solving and Decision Making Instructor: Dr. J. R. van Dorp 1 EXTRA PROBLEM 7: SENSITIVITY ANALYSIS (Problem 5.12 in the Book) Reconsider Hugh Liedtke’s Decison as diagrammed below Low (1-p-q) High (p) 10.3 0 Medium (q) 5 Final Court Decision Accept \$3 Billion Refuse Low (1-p-q) High (p) 10.3 0 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) Note that three strategies are possible: (1) Accept \$2 billion, (2) Counteroffer \$5 Billion and then accept \$3 Billion if Texaco counteroffers, and (3) Counteroffer \$5

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Unformatted text preview: Billion and then refuse \$3 Billion if Texaco counteroffers. A. Create a two-way sensitivity graph that shows optimal strategies for Liedtke for all possible values of p and q EMGT 269 - Elements of Problem Solving and Decision Making Instructor: Dr. J. R. van Dorp 2 EMGT 269 - Elements of Problem Solving and Decision Making Instructor: Dr. J. R. van Dorp 3 B. If Liedtke thinks that p must be at least 0.15 and q must be more than 0.35 can he make the decision without further probability assessment....
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Extra Problem 7 - Sensitivity Analysis - Billion and then...

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