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Individual - Pre-Class Assignment - Decision Tree - Adrian Ova Triandi - 29320160

The document describes two decision making scenarios: 1) A concert organizer considering three marketing options of increasing cost and risk to promote ticket sales. Option 2 of advertising in music and national press yields the highest payoff of £36. 2) A magazine publisher, Westward, deciding whether to launch their magazine before or after a rival. Launching in April before the rival yields the highest expected profit of $4 million. However, launching in April after the rival with a $200k advertising boost has the highest probability of success at 49% and $3.8 million profit. The identified policy is not very sensitive to changes in the probability estimates.

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92 views

Individual - Pre-Class Assignment - Decision Tree - Adrian Ova Triandi - 29320160

The document describes two decision making scenarios: 1) A concert organizer considering three marketing options of increasing cost and risk to promote ticket sales. Option 2 of advertising in music and national press yields the highest payoff of £36. 2) A magazine publisher, Westward, deciding whether to launch their magazine before or after a rival. Launching in April before the rival yields the highest expected profit of $4 million. However, launching in April after the rival with a $200k advertising boost has the highest probability of success at 49% and $3.8 million profit. The identified policy is not very sensitive to changes in the probability estimates.

Uploaded by

Andreas Audi Kemal
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Adrian Ova Triandi

29320160

A London Tree
Describe the company’s decision making
1) What is the problem?
• A pop concert in London is considering its marketing strategy for ticket
sales and event promotion.
• The committee team has three types of options, where option 1 is the
cheapest and option 3 is the most expensive, along with increasing risks
and possible rewards.
2) What is the decision node?
Decide which option is wise for the concert organizer for the necessary
marketing strategy decisions.
3) What are the State of Nature (SoN) of the problem?
Option 1: Advertise only in the music press;
Option 2: As option 1 but also advertise in the national press;
Option 3: As options 1 and 2 but also advertise on commercial radio.
4) Would you have any reservations about recommending this option to the
company?

Figure 1 TreePlant

Option 2 (Advertise in the music press and the national press) will yield the best
payoff, as it generates a total value of 36, the highest if compared to options 1
(-8) and 3 (2). Since it creates the maximum profit, the organizer should choose
to advertise in the music press and the national press.
However, keep in mind that the actual conclusion may change over time due to
other variables not included in the decision tree (such as the guest star list,
venue, date, etc)

B. Westward Magazine Publisher


1) Draw a decision tree to represent Westward problem.

Figure 2 Tree Decision

2) Assuming that Westward’s objective is to maximize expected profit, determine


the policy that they should choose.

Looking at the results, the company should launch in April before the rival
launches with a profit of $4 million.
However, the highest likelihood is in April after the rival has launched and with
a funding boost. With the highest probability of 49% and a profit of $3.8
million, then this option is the wisest.

3) In reality, westward had little knowledge of the progress his rival had made.
This means that the probability is given above of beating its rival (if its launch
is, or not, put forward) is a very rough estimate. How sensitive is the policy you
identified in (b) to changes in these probabilities?

There will be no significant impact whether launching before or after rivals if


the forecast is off the mark. The good thing to do is launch it as quickly as
possible and minimize the chances of launching after rivals. After all, a $200k
boost in advertising funds will increase the chances of profit.

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