London Coaches (LC) is considering running a coach service between London and Brussels. They may operate the
Question:
London Coaches (LC) is considering running a coach service between London and Brussels. They may operate the service independently, doing their own sales and marketing. They will also have to compete against the existing service on this route. Alternatively, they could form a partnership with the incumbent operator, leaving the sales and marketing to them, and providing coaches and drivers on demand. The profit per month will depend on the number of customers on the route as shown in the table below. The probabilities for customer demand levels, as judged by LC, are also given in the table. https://drive.google.com/file/d/18sVC3sMZr05fHArLh71ABAUe0O9xOrs7/view?usp=share_link Of course, if they choose not to run the service, they will have neither profits nor losses. a. Using a suitable package such as Precision Tree, represent this problem. Clearly indicate what the final recommendation and expected payoff are. b. In order to make a more informed decision, LC could hire a transport consultant from the University of Westminster to give them a forecast on the number of passengers. The forecast costs £6,000 and yield two possible results: a "fairly high" or a "fairly low" passenger number prediction. LC believes that these predictions are equally likely. The consultant is good at his job and would not predict a fairly low number of passengers if there will be a high number of passengers or a fairly high number of passengers if there will be a low number of passengers. If he predicts a fairly low number of passengers, then there is a 60% chance that there will be a medium number of passengers and if he predicts a fairly high number of passengers then there is a 40% chance that there will be a medium number of passengers. Find the company's optimal course of action using a decision tree. c. Perform sensitivity analysis on the probability that the consultant's prediction about the number of passengers is "fairly low" or "fairly high" to analyse the robustness of your recommendation to possible changes of this parameter. d. In the report, describe your findings.
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts