Scenario $2$: EMU Australia is trying to decide whether to ship some customer orders now via UPS or wait until after the threat of another UPS strike is over. If EMU Australia decides to ship the requested merchandise now and the UPS strike takes place, the company will incur $$60,000$ in delay and shipping costs. If EMU decides to ship the customer orders via UPS and no strike occurs, the company will incur $$4000$ in shipping costs. If EMU decides to postpone shipping its customer orders via UPS, the company will incur $$10,000$ in delay costs regardless of whether UPS goes on strike. EMU believes there is a $15\%$ chance that UPS will go on strike and impact their shipment.$$

$1.$ Complete the decision tree. What is the value of the decision?

$2.$ What values are compared for determining the final decision?

$3.$ For what range of strike likelihoods, if any, will EMU Australia keep its costs lower by postponing shipping its customer orders via UPS? $>=15\%($or more precisely $>=10\mathrm{.}7\%)$

Suppose now that EMU can pay $$1,000$ to gain a better understanding of how likely a UPS strike actually is$.$ Based on similar strike threats in the past, the company assesses that if there will be a strike, the new information will correctly predict a strike with probability $0\mathrm{.}75,$ and if there will not be a strike, the information will correctly predict no strike with probability $0\mathrm{.}85.$

Decision tree$$

Assuming EMU wants to keep their costs as low as possible, what should they do$?$

What values are compared for determining the final decision of whether to gather more information?

What is the likelihood there will actually be a UPS strike given the new information predicted there will be a strike?

What is the most EMU should be willing to pay for the additional information on the likelihood of a strike?

EV Free Info$$

$7540$

EV No Info$$

$10000$

EVI

$2460$

Sensitivity analysis in excel on both $($a$)$ the cost postponing the shipments and $($b$)$ the likelihood the gathered information will correctly predict a strike. The cost of postponing the shipments should be varied between $$5,000-$$$15,000$ and $11$ steps, and the likelihood of correctly predicting if there will be a strike should be buried from $0-1$ using $11$ steps. You should complete a one$-$way sensitivity analysis to each input and a two$-$way analysis including both.$$

Within the range of values tested, is the decision to gather additional information sensitive to the cost of postponing the shipment?$$

For this and the subsequent parts, speak to the decision and not just the EMV$$

Within the range of values tested, is the decision to gather additional information sensitive to the likelihood the gathered information will correctly predict a strike?$$