The T-Shirt Court Case Summary
The case “NORTH STAR CONCERT” is about Lucinda Ramirez who is about to begin producing T-shirts for a rock concert. The central problem in this case is that she needs to decide how many shirts she should produce for the concert to maximize her profits.
Her decision in this case can be categorized as “Decision under uncertainty” as probabilities associated with all possible states of nature are neither stated in the case facts nor can be determined from the given data. I would like to arrive at a decision by using decision table with probable states of nature with their respective pay-offs. The significant factors of the central problem are attendance in the stadium, percent of attendees who would buy shirts, whether the North Star …show more content…
band would cancel the rock concert or not and attitude of Lucinda towards risk and hence criteria of choice for decision making. As per Lucinda estimates, the probability of stadium (capacity 100,000) being 90% full is low and the probability for stadium being 50% full is high. She would also like to consider a possibility of stadium being 25% full in case of bad weather.
Thus possible attendance of stadium would range from 25,000 to 90,000. With average 10% of attendees buying shirts, the probable states of nature can be taken as 2500, 5000 and 9000.
PIGEON HOLE # 17 PAGE2 OF 4
Lucinder was concerned about the rock band cancelling the show and thus this can also be taken as another possible state of nature . Hence the decision table would consists of four possible states of nature namely 0, 2500,5000,9000 ( Number of people buying shirts from Lucinder). The important factor is choice of criteria for decision making under uncertainty . The five criteria used are namely Laplace, pessimism, optimism, Hurwicz criterion and Savage criterion. The Laplace criterion cannot be applied to this case as probabilities associated with each state of nature is different . As evident from the case facts,
Lucinder is neither completely optimistic nor completely pessimistic about the pay-offs.
The savage criteria does not fit to this situation because Lucinder is ready to recognize losses incurred in business as its one of the risks. Hence only criteria which suits the given scenario is hurwicz criteria with an assumption of coefficient of optimism = 0.8. The reason for high value of coefficient of optimism is because though Lucinder is pretty optimistic about the pay-offs , her only concern is the cancellation of the show. According to the decision table shown below, the maximum monetary value will be obtained when Lucinder decides to order 4000 shirts.
The factor which involves the largest risk is cancellation of concert by rock band and by analysis of various factors and with hurwicz criteria, Lucinder should order 4000 shirts for better profits.
Her decision in this case can be categorized as “Decision under uncertainty” as probabilities associated with all possible states of nature are neither stated in the case facts nor can be determined from the given data. I would like to arrive at a decision by using decision table with probable states of nature with their respective pay-offs. The significant factors of the central problem are attendance in the stadium, percent of attendees who would buy shirts, whether the North Star …show more content…
band would cancel the rock concert or not and attitude of Lucinda towards risk and hence criteria of choice for decision making. As per Lucinda estimates, the probability of stadium (capacity 100,000) being 90% full is low and the probability for stadium being 50% full is high. She would also like to consider a possibility of stadium being 25% full in case of bad weather.
Thus possible attendance of stadium would range from 25,000 to 90,000. With average 10% of attendees buying shirts, the probable states of nature can be taken as 2500, 5000 and 9000.
PIGEON HOLE # 17 PAGE2 OF 4
Lucinder was concerned about the rock band cancelling the show and thus this can also be taken as another possible state of nature . Hence the decision table would consists of four possible states of nature namely 0, 2500,5000,9000 ( Number of people buying shirts from Lucinder). The important factor is choice of criteria for decision making under uncertainty . The five criteria used are namely Laplace, pessimism, optimism, Hurwicz criterion and Savage criterion. The Laplace criterion cannot be applied to this case as probabilities associated with each state of nature is different . As evident from the case facts,
Lucinder is neither completely optimistic nor completely pessimistic about the pay-offs.
The savage criteria does not fit to this situation because Lucinder is ready to recognize losses incurred in business as its one of the risks. Hence only criteria which suits the given scenario is hurwicz criteria with an assumption of coefficient of optimism = 0.8. The reason for high value of coefficient of optimism is because though Lucinder is pretty optimistic about the pay-offs , her only concern is the cancellation of the show. According to the decision table shown below, the maximum monetary value will be obtained when Lucinder decides to order 4000 shirts.
The factor which involves the largest risk is cancellation of concert by rock band and by analysis of various factors and with hurwicz criteria, Lucinder should order 4000 shirts for better profits.