Decision Analysis

Decision Analysis Order Description Imperial College EXECUTIVE EDUCATION London Data, Models and Decisions Wolfram Wiesemann BUSlNESS SCHOOL Group Assignment (1) During their spare time in college, Anders and Michael have developed software to regulate traffic on internet sites. Their product is very original, and they have applied for a patent. They estimate that there is an 80% chance of their patent being approved. Last week, Anders and Michael have presented their ideas to Singular Inc., the dominant player in this market, after Singular had signed a confidentiality agreement with Anders and Michael. Yesterday, Singular announced a new software product that looks suspiciously similar to the software that Anders and Michael have developed. Anders suggested to sue Singular immediately, but Michael felt they should wait until they receive notification of their patent (which is still pending). Michael reasoned that their case will be much stronger if they had a patent on the product. Suppose that Anders and Michael have a 90% chance of winning a lawsuit against Singular if their patent is approved, and they have a 60% chance of winning a lawsuit while their patent is still pending. However, if their patent is not approved, then the chance of winning a lawsuit drops to 40%. In any case, Anders and Michael expect to win $1,000,000 if the lawsuit is successful. However, they estimate that suing Singular Inc. would cost $100,000, no matter whether the patent is still pending, approved or rejected. (a) Using a decision tree, decide what Anders and Michael should do to maximise the expected profits! (b) Singular informally makes a “now-or-never” offer to buy Anders’ and Michael’s software for $500,000. Should Anders and Michael agree to this offer? (2) The Primo Insurance Company is introducing two new product lines: special risk insurance and mortgages. The expected profit is $5/unit on special risk insurance and $2/unit on mortgages. Management wishes to establish sales quotas for the new product lines to maximise the total expected profit. The work requirements are as follows: (a) Formulate a linear program for this problem! f tailgatestg‘;int. T '7 v - v Work-hours Y Department” 'SpeCi‘éli'riskl “ .1 Mortgage "available Underwriting 3 2 2,400 Administration 0 1 800 Claims 2 0 1,200 (b) Try to find sales quotas for the new product lines that satisfy the available work-hour limits and maximise the total expected profits. You do not have to find the optimal quotas, but you should justify your choice of quotas! PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET AN AMAZING DISCOUNT :)