You may assume that the production costs to the winery are the same for each of the
Question:
You may assume that the production costs to the winery are the same for each of the possible wines, despite the differences in volumes with some of the possible wines. Thus maximizing revenue will be equivalent to maximizing profit. a) Assume Mr. Ordoñez wants to maximize expected profits. What should he do? What is the expected revenue with this strategy? Draw a decision tree to support your recommendation. b) What is the EVPI of knowing whether the storm hits before making the harvest decision? c) Suppose Cervantes can perform a test now to see if the Botrytis mold is present in the soil. If the mold is present in the soil, there is a 90% chance that it will grow on the grapes if the storm hits. If the mold is not present, there is no chance that the mold will grow on the grapes if the storm hits. The mold will not grow on the grapes if there is no storm. What is the most Ordoñez should be willing to pay for this test?
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr