The Illini Movie Studio is trying to decide how to distribute its new movie Accountants Gone...
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The Illini Movie Studio is trying to decide how to distribute its new movie Accountants Gone Wild. The movie has the potential of being a great financial success (a "smash "), but the Illini executives are not sure because the subject is very controversial ... and they have seen some films heralded as "smashes become "flops" with disastrous financial consequences The decision facing Illini is whether to initially release the movie Accountants Gone Wild on a limited first run basis. This means that the movie will show only in a few select theaters during the first six months. After six months it will be released generally. If the movie turns out to be a "smash, this is clearly the best approach because the studio makes considerable profit from these select theaters The other alternative is to release the film for wide distribution immediately The profits for these "smash a "medium two alternatives are given in the table below, classified in terms of whether the film is a success, or a "flop." Profits from film Accountants Gone Wild Level of Success Smash Medium Flop Audience Rating Outstanding Good Poor Totals Probability 0.3 9 1 There is considerable discussion amongst the Illini executives about the potential of Accountants Gone Wild. They agree on the probabilities shown in the above table, but which decision to make is still not clear to them. One possibility is to have a few sneak previews of the movie and survey the audiences opinions. The cost of such a process would be $50,000, but some executives think it would be money wasted since sneak preview audiences tend to rate a movie as good or outstanding even when it later turns out to be a flop. The following table was produced detailing Illini's past experience with 40 sneak preview audience surveys. Smash 0.4 0.3 1.0 0 10 Sneak preview audience reaction Limited initial release $22 million 8 million -10 million Medium Movie's actual success 12 6 Alternatives 2 20 Flop Widespread release $12 million 3 5 2 10 8 million -2 million Totals 24 12 4 40 Required: a) Draw the full decision tree for this problem (you should use a full page of paper....it's a very large tree!). b) Assume that Illini is willing to base its decision on expected monetary value. What decision should Illini Movie Studio make about the movie Accountants Gone Wild? The Illini Movie Studio is trying to decide how to distribute its new movie Accountants Gone Wild. The movie has the potential of being a great financial success (a "smash "), but the Illini executives are not sure because the subject is very controversial ... and they have seen some films heralded as "smashes become "flops" with disastrous financial consequences The decision facing Illini is whether to initially release the movie Accountants Gone Wild on a limited first run basis. This means that the movie will show only in a few select theaters during the first six months. After six months it will be released generally. If the movie turns out to be a "smash, this is clearly the best approach because the studio makes considerable profit from these select theaters The other alternative is to release the film for wide distribution immediately The profits for these "smash a "medium two alternatives are given in the table below, classified in terms of whether the film is a success, or a "flop." Profits from film Accountants Gone Wild Level of Success Smash Medium Flop Audience Rating Outstanding Good Poor Totals Probability 0.3 9 1 There is considerable discussion amongst the Illini executives about the potential of Accountants Gone Wild. They agree on the probabilities shown in the above table, but which decision to make is still not clear to them. One possibility is to have a few sneak previews of the movie and survey the audiences opinions. The cost of such a process would be $50,000, but some executives think it would be money wasted since sneak preview audiences tend to rate a movie as good or outstanding even when it later turns out to be a flop. The following table was produced detailing Illini's past experience with 40 sneak preview audience surveys. Smash 0.4 0.3 1.0 0 10 Sneak preview audience reaction Limited initial release $22 million 8 million -10 million Medium Movie's actual success 12 6 Alternatives 2 20 Flop Widespread release $12 million 3 5 2 10 8 million -2 million Totals 24 12 4 40 Required: a) Draw the full decision tree for this problem (you should use a full page of paper....it's a very large tree!). b) Assume that Illini is willing to base its decision on expected monetary value. What decision should Illini Movie Studio make about the movie Accountants Gone Wild?
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Related Book For
Data Analysis and Decision Making
ISBN: 978-0538476126
4th edition
Authors: Christian Albright, Wayne Winston, Christopher Zappe
Posted Date:
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