Question 1 (1 point) Now that Pennzoil has the decision modeled, Liedky is asking some questions to his staff and playing "What if... games using the models to see how their answers change the decision. One question he's asked his legal team is "have you ever seen an appeal of this type get overturned, resulting in a $0 award?". After looking for a precedent in past cases, the legal team acknowledges that they could NOT find such a case. Modify your Decision Tree or your Influence Diagram for the Pennzoil/Texaco case to show that the court case's minimal award has been changed to the $2B dollars originally offered by Texaco. What is the EMV for the decision accurate to 4 decimal places? Your Answer: Answer Question 2 (1 point) After you have modified your Decision Tree for the Pennzoil/Texaco case to show that the court case's minimal award has been changed to the $2B dollars as advised by the legal team, does your decision show dominance of one alternative over another? Yes, the counter offer shows Deterministic Dominance over all other alternatives. Yes, the Texaco offer shows Deterministic Dominance over all other alternatives. Yes, the Texaco offer shows Stochastic Dominance over all other alternatives. No . . Pennzoil Alternatives Accept $2B Positive - Known quantity Negative - Below $3 5B that his advisors suggest Counteroffer $5B Texaco might accept Texaco could counter with $3B Texaco could reject and both return to court Reject $2B and return to court Assumption returning to court reduced to one of three outcomes for simplicity of analysis Judgment supports the $10.3 B award Judge awards $5B Judge rules in favor of Texaco ($0 to Pennzoil) . . . What probabilities do we assign to the uncertain events? . 50% chance that Texaco rejecting Pennzoil's Counter offer No further information on CEO's willingness to negotiate Pennzoil executives assume counter offer is twice as likely as offer acceptance Ie. Counter%=2*Acceptance% Counter% + acceptance% = 50% = 3*acceptance% Therefore; Counter ~ 33%, and Acceptance ~17% Court uncertainties Good chance that court could uphold Pennzoil's case Liedtke acknowledges the possibility that the court awards nothing Most likely that the court awards a reduced amount Therefore: Reduced amount 50% Zero award 30% Pennzoil's award stays intact 20% Question 1 (1 point) Now that Pennzoil has the decision modeled, Liedky is asking some questions to his staff and playing "What if... games using the models to see how their answers change the decision. One question he's asked his legal team is "have you ever seen an appeal of this type get overturned, resulting in a $0 award?". After looking for a precedent in past cases, the legal team acknowledges that they could NOT find such a case. Modify your Decision Tree or your Influence Diagram for the Pennzoil/Texaco case to show that the court case's minimal award has been changed to the $2B dollars originally offered by Texaco. What is the EMV for the decision accurate to 4 decimal places? Your Answer: Answer Question 2 (1 point) After you have modified your Decision Tree for the Pennzoil/Texaco case to show that the court case's minimal award has been changed to the $2B dollars as advised by the legal team, does your decision show dominance of one alternative over another? Yes, the counter offer shows Deterministic Dominance over all other alternatives. Yes, the Texaco offer shows Deterministic Dominance over all other alternatives. Yes, the Texaco offer shows Stochastic Dominance over all other alternatives. No . . Pennzoil Alternatives Accept $2B Positive - Known quantity Negative - Below $3 5B that his advisors suggest Counteroffer $5B Texaco might accept Texaco could counter with $3B Texaco could reject and both return to court Reject $2B and return to court Assumption returning to court reduced to one of three outcomes for simplicity of analysis Judgment supports the $10.3 B award Judge awards $5B Judge rules in favor of Texaco ($0 to Pennzoil) . . . What probabilities do we assign to the uncertain events? . 50% chance that Texaco rejecting Pennzoil's Counter offer No further information on CEO's willingness to negotiate Pennzoil executives assume counter offer is twice as likely as offer acceptance Ie. Counter%=2*Acceptance% Counter% + acceptance% = 50% = 3*acceptance% Therefore; Counter ~ 33%, and Acceptance ~17% Court uncertainties Good chance that court could uphold Pennzoil's case Liedtke acknowledges the possibility that the court awards nothing Most likely that the court awards a reduced amount Therefore: Reduced amount 50% Zero award 30% Pennzoil's award stays intact 20%