Decision Analysis I
November 8th, 2007
Due: Friday November 30th, 2007
The case study will give you practice applying the concepts you are learning in MS&E 252. . You are from the XYZ consulting company (you can create your own name). William Jaeger of Freemark Abbey Winery has hired your company to help him make a production decision. A storm is approaching the winery and Jaeger is not sure if he should wait for the storm or harvest the grapes immediately. Sometimes after a warm rain the grapes are attacked by botrytis mold. This mold helps to produce botrytised Riesling, which is highly valued by wine connoisseurs.
Meeting with your TA
Teaching assistants will be available to meet groups between November 12th and November 16th. Time and location will be made available on the announcement section of the website. This is an opportunity for groups to receive feedback and ask clarification questions. To make the most of this meeting, you should have assessed the decision basis, proposed a decision tree with numerical assessments, and a tentative decision diagram. Your effort and preparation for this meeting will count toward your case study grade.
You must provide Mr. Jaeger with a report that summarizes your conclusions and recommendations. Your report should consist of:
• A one-page executive summary will show your main assumptions and conclusions. It will be given to Mr. Jaeger himself.
• A series of slides (no more than 15) to support your conclusions Please note that your executive summary/slides should highlight your most interesting and insightful results in an intuitive and readable fashion. Keep in mind that more information is not necessarily better. Mr. Jaeger is a busy individual who wants to make a quick and well informed decision. He expects you to respect his time and earn your salary by clearly identifying the important information so that he doesn’t have to do it himself. He requests that if you have any less important results or technical details, you place them in the support slides but not mention them in the executive summary.
If you feel that your slides are not explicit enough, you can add written comments for each slide. Your report should at least comprise the following elements: • The details of the decision basis (information, alternative, preferences). • A decision diagram.
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Decision Analysis I
November 8th, 2007
• A decision tree.
• Sensitivity analysis to one or several uncertainties
• Sensitivity analysis to the risk-aversion coefficient
• Value of information – should William Jaeger rent the SuperDoppler weather detector? • Value of control – should William Jaeger buy the spores from Borz? • Final recommendation – what do you recommend William Jaeger do?
1) Issue raising and categorization
Read the Freemark Abbey Case and write down the issues that come to mind: What are the principal concerns of William Jaeger?
What choices can he make?
What uncertainties does he face?
What does he want?
In addition to the information provided in the case, the following additional information might be useful in your analysis:
• The same process that results in increased sugar content for botrytised Riesling results in a decrease in juice volume.
• If it rains and the botrytis does not form, the rainwater will be absorbed by the vines, swelling the grapes. This would result in a less valuable “thin” wine. • Jaeger always has the alternative of not bottling substandard wine to avoid harming its reputation for future years. It could sell the grapes in bulk to another wine maker. This alternative would bring in less revenue but would save the winery’s reputation. • If Jaeger decided not to harvest the grapes immediately and the storm did not strike he would leave the grapes to ripen more fully. While waiting for the sugar level to rise, the acidity levels must also be...