Game Theory and Best Decision Essay

Compute the projected profit for the order quantities suggested by the management team under three scenarios: worst case in which sales = 10,000 units, most likely case in which sales = 20,000 units, and best case in which sales = 30,000 units.

The third scenario was ignoring the option to invest in the second-generation project and selling the equipment in year 2. We evaluated this option as a put option. First, we calculated the probabilities for going up and down based on the assumption of a risk neutral word. As a result, the probability of going upward is calculated as 0.3375 and downward probability is 0.6625. In order to determine the present value of all the sequence cash flow at the end of year 2, we calculated the upside change rate and downside change rate as 64.87% and -39.35%, respectfully. The next step is to analyze the option value by using the “Binomial Tree” method. In order to determine the present value of all the subsequence cash flow at the end of year 2, we calculated the cash flow at each node on the tree, until 2006. We discounted all the cash flow at the risk free rate at 10%. The End of Year NPV of all the subsequence cash flow at Year 2 is calculated as $7,571,752, and the selling price of the equipment at end of 2 is $4,000,000, which is the salvage value. We found the NPV of selling the machine at end of Year 2 to be -$2,951,861 as of Year 0, which is negative. The APV of the project after adding the option turned out to be -$6,321,932. This negative APV suggest that the

The Mabo decision was a significant event for the civil right of Aboriginal and Torres Strait Islander people. Discuss.

Problem 1: Jonathon Barrs is a manager for Easy Manufacturing, LLC. He wishes to evaluate three possible investments. These investments are for the purchase of new machine tools from Germany, Japan, and a local US manufacturer. The firm earns 10% on its investments and they have a risk index of 5%. The chart below lays out the expected return and expected risks of the three projects.

The maximin decision rule, is a basic comparison of two minimum outcomes (Douglas, 2012). Under this rule the highest or best out of the worst outcomes would be the right choice. In light of this fact, Business 2 would be chosen under this rule. Making $5,000 in profit is a better

I was asked to provide a distribution pattern that minimizes shipping costs and provides adequate availability and demand. I used transportation modeling to solve this problem. Transportation modeling is “an interactive procedure that finds the least costly means of moving products from a series of sources to a series of destinations” (Heizer & Render, 2011). This tool is used to determine the best distribution pattern for multiple locations. It is best for this problem because it allows for us to determine how many products can be held at each location to give Shuzworld the lowest shipping costs. The original setup had an optimal shipping cost of $13,600. It had 1300

d) What decision should the company follow and what is the expected value? He should serve breakfast, because his expected value will be $85,000.

* Use the profit maximization rule MR = MC to determine your optimal price and optimal output level now that you have market power. Compare these values with the values you generated in Assignment 1. Determine whether your price higher is or lower.)

In January 2003, Michael Pogonowski, the chief financial officer of Aurora Textile Company, was questioning whether the company should install a new ring-spinning machine, the Zinser 351, in the Hunter production facility. This new machine has ability to produce a finer-quality yarn that would be used for higher-quality and higher-margin products. In deciding whether or not to invest this new machine, NPV and the payback period are critical factors. Firstly, we need to forecast the cash flows that the Zinser 351 will generate in the future. After calculation, the ten-year NPV will be $3, 172,582. Secondly, we use the payback period to analyze the acceptance of this project. Based on this analysis,

The insurance industry has long been applying game theory to evaluate whether or not individuals are insurable and determine how much premium to charge them based on their apparent needs. This interaction between the consumer and the insurance company can be characterized as a game because not only are they playing against one another but each party is waging on an outcome more beneficial to them. In a traditional life insurance, there are many variables to consider when utilizing game theory to form a strategy as there are investment components along with complex riders. Thus, in order to keep the game relatively simple, this paper will assume the insurance being considered is term life and use game

Rational choice theory, also known simply as choice theory, is the assessment of a potential offender to commit a crime. Choice theory is the belief that committing a crime is a rational decision, based on cost benefit analysis. The would-be offender will weigh the costs of committing a particular crime: fines, jail time, and imprisonment versus the benefits: money, status, heightened adrenaline. Depending on which factors out-weigh the other, a criminal will decide to commit or forgo committing a crime. This decision making process makes committing a crime a rational choice. This theory can be used to explain why an offender will decide to commit burglary, robbery, aggravated assault, or murder.

Organizational behavior helps managers to improve the organization in a good way. Decision making process is the one of the behavior in human organizational behavior. According to McShane and Von Glinow (2000), “decision making a conscious process of making choices among one or more alternatives with the intention of moving toward some desired state of affairs”. Decision making is a linear process and it includes six steps such as identifying the problems, gather and evaluate data, list and evaluate alternatives, select best action, implement the decision and getter feedback (refer to Figure 1 in Appendix 1).

Having eliminated completely the option for producing 15,000 shirts, the analysis now focuses on the remaining three options that were available to us at the beginning. With the option of producing 10,000 shirts, the probability of making at least a profit of $6791 is 6%. Similarly, there is also a 6% probability of making a loss of $3458. On the other end of the spectrum, there is a

Professor Eric Maskin was born in New York City on 12 December, 1950. He spent his child and high school years in Alpine, New Jersey. Alpine was a very small town, so he has study his high school in the town of Tenafly. When he was at Tenafly high school he found Mathematics very interesting due to a great Calculus teacher named Francis Piersa. So he continued with Maths major at Harvard. Maskin happen to take some economics courses along with his degree in Mathematics. During his undergraduate studies he happened to attend Kenneth Arrow’s class on information economics, he said “Kenneth Arrow’s class was so inspiring that I decided to change direction. It seemed to me that economics combined the best of both worlds: the rigor of mathematics with the immediate relevance of a social science” (Maskin, 2013a). He continued at Harvard on his master’s and PhD in applied mathematics, but focused on economics. Maskin wrote his dissertation on mechanism design and social welfare on Arrow‟s direction (Maskin, 2008). In 2007, Eric Maskin was awarded Nobel Prize in economics along with Leonid Hurwicz and Roger Myerson for laying the fundamentals of mechanism design theory.

Based on this these scenarios Mr. Grant would have a very difficult decision to make. Firstly, the net profit does not take into account the $500,000 investments that were made by both Mr. Grant and JTL. Secondly, the terms of the long-term loan are not made clear nor did the negotiations include an amortization schedule. As well, a long-term plan has not been made based on expected increases in private Internet usage. Finally, the probability of each scenario being realized is a very important tool to determine the expected value of Mr. Grant’s decision. If each scenario is equally likely to occur than Mr. Grant will have an expected