Freemark Abbey Winery
Freemark Abbey Winery was established by the members of partnership. William Jaeger is one of the member own the company. It is located in St. Helena, California in the northern Napa Valley where the winery can produce the best grape quality. Each year Freemark Abbey can produce 25,000 cases of wine bottled and there is 1000 cases of Riesling. (12 bottles of wine in each case)
Jaeger needs to make a decision to maximize the profit and minimize the loss depending on the possible risk of the approaching storm. In order for him to decide whether to harvest the Riesling grapes immediately or after the storm, there are five important factors that might help him to make a wise decision: time, price, profit, quality, and reputation.
As we know, “the cost to the winery was about the same for each of the possible styles of wine” (Bodily, S. E, 1998 p.477). According to the weather report, there is a 50/50 chance that the rainstorm will arrive and hit his farm area. Therefore, he assumes two possible options that can compare with each other and makes the best decision based on the information. Jaeger can choose to harvest the grapes immediately in order to avoid a huge loss or he can also choose to harvest the grapes after the storm to get the maximum profit with risk.
The first possible option is to harvest the grapes later. Whether the storm comes or not is really dependent on luck . If there is a 50 percent chance of the rainstorm coming, there is a 40 percent chance warm, light rain leads to the development of the beneficial mold. The grapes will grow the botrytise riesling mold, which can be sold for $8.00 per bottle. However, during the production, the total juice will be reduced by 30 percent. As a result, there is only 70 percent juice left during the production.
There is another 60 percent chance cold and heavy rain will merely swell the berries by 5-10 percent, decreasing their concentration. This will cause the worse