Informs Society is planning the 2022 annual conference for Applied Operations Research. The society board members...
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Informs Society is planning the 2022 annual conference for Applied Operations Research. The society board members haven't make the final decision yet whether to hold the conference online or on-site in Los Angles, US. If the conference is planned offline in Los Angles, the editor-in-chief estimated a 0.65 probability that the covid-19 situation would be back to normal and conference will attract successful fund support from commercial companies in this field. If successful, a profit of $75000 will be realized. However, if the society decides to hold the conference offline and the covid-19 situation remains, a loss of $25000 will occur because fewer commercial companies would participate. Alternatively, if the conference is held online, then the expected profit would be $15000. Before making the decision to hold the conference online or on-site, the editor is considering reviewing more information from CDC about current vaccination impact. A review process provides either a favorable (F) or unfavorable (U) evaluation of the future situation. Existing experience with the review process suggests that probabilities P(F) = 0.7 and P(U) = 0.3 apply. A fixed reviewing fee applies, $2000. Suppose we define s₁ as the event that the conference on-site is successful and s₂ as the event that the conference on-site is unsuccessful. The editor-in-chief's initial estimated probabilities of s₁ and s₂ will be updated based on whether the review is favorable or unfavorable. The updated conditional probabilities are as follows: P(S₁|F) = 0.75 P(s₁|U) = 0.4 (a). Draw and describe the decision tree that will facilitate your analysis. (10 marks) (b). Determine and elaborate on editor-in-chief's recommendation given the above information. Informs Society is planning the 2022 annual conference for Applied Operations Research. The society board members haven't make the final decision yet whether to hold the conference online or on-site in Los Angles, US. If the conference is planned offline in Los Angles, the editor-in-chief estimated a 0.65 probability that the covid-19 situation would be back to normal and conference will attract successful fund support from commercial companies in this field. If successful, a profit of $75000 will be realized. However, if the society decides to hold the conference offline and the covid-19 situation remains, a loss of $25000 will occur because fewer commercial companies would participate. Alternatively, if the conference is held online, then the expected profit would be $15000. Before making the decision to hold the conference online or on-site, the editor is considering reviewing more information from CDC about current vaccination impact. A review process provides either a favorable (F) or unfavorable (U) evaluation of the future situation. Existing experience with the review process suggests that probabilities P(F) = 0.7 and P(U) = 0.3 apply. A fixed reviewing fee applies, $2000. Suppose we define s₁ as the event that the conference on-site is successful and s₂ as the event that the conference on-site is unsuccessful. The editor-in-chief's initial estimated probabilities of s₁ and s₂ will be updated based on whether the review is favorable or unfavorable. The updated conditional probabilities are as follows: P(S₁|F) = 0.75 P(s₁|U) = 0.4 (a). Draw and describe the decision tree that will facilitate your analysis. (10 marks) (b). Determine and elaborate on editor-in-chief's recommendation given the above information.
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Auditing and Assurance services an integrated approach
ISBN: 978-0132575959
14th Edition
Authors: Alvin a. arens, Randal j. elder, Mark s. Beasley
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