raisin price is set as $2.25 per pound, the raisin demand will be 1,000,000 pounds; second, if the raisin price is decreased/increased by 1 cent, the raisin demand will increase/decrease by 20,000 pounds ” . Actually this demand model is a result from demand forecasting analysis based on the demand/price data collected in the previous years. Now in part (B) of the case, we will conduct this demand forecasting analysis by using linear regression model. Please refer to the excel data file to get access of the historical data of demand and price in the previous years. Notice that these data not only belong to firm A, but also belong to the other companies who do the same business. Therefore, form A’s management group believe that a data analysis based on all of the data can bring the most precise understanding of the demand model. Given the historical data, how can you find out the model of raisin demand that depends on the raisin price?
Firm A’s O ptimal Raisin Price (C) In part (A) and (B) of the case, you have built up the demand model that depends on the raisin price, and have solved the optimal raisin price $1.88. Now given the optimal raisin price you solved in part (B), since the demand is still uncertain, how can you consider the uncertainty in demand and analyze the risk in net profit due to the demand uncertainty?
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- Fall '17