A

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24

Acme marketing decisions

Inputs

Fixed costs ($1000s)

Test market
National market

100
7000

Unit margin

$18

Possible quantities sold (1000s of units) in national market

Great
600
Fair
300
Awful
90
Bayes' rule calculations

Prior probabilities of national market results

Great
0.45

Fair
0.35

Likelihoods of test market results (along side), given national market results (along top) from historical data
Great
Fair
Great
0.64
0.18
Fair
0.26
0.57
Awful
0.10
0.25

Awful
0.20

Awful
0.09
0.48
0.43

Unconditional probabilities of test mkt results (denominators of Bayes' rule)

Great
0.3690
Fair
0.4125
Awful
0.2185
Posterior probabilities of national mkt results (along top), given test mkt results (along side)
Great
Fair
Awful
Great
0.7805
0.1707
0.0488
Fair
0.2836
0.4836
0.2327
Awful
0.2059
0.4005
0.3936

No

Great

45.0%

Natl mkt?

#NAME?
Yes

#NAME?

#NAME?

#NAME?

#NAME?

#NAME?

$3,800

#NAME?

#NAME?

#NAME?

#NAME?

#NAME?

#NAME?

($1,600)

#NAME?

#NAME?

#NAME?

#NAME?

#NAME?

#NAME?

($5,380)

#NAME?

Natl mkt result

EVPI

#NAME?
No

Fair

35.0%

Natl mkt?

#NAME?
Yes

No

Awful

20.0%

Natl mkt?

#NAME?
Yes

EVPI calculation
EMV with free PI
EMV with no Info
EVPI

#NAME?
#NAME?
#NAME?

PrecisionTree Risk Profile - Probability Chart

Performed By: Kelley School of Business
Date: Friday, February 08, 2008 3:31:10 PM
Model: Decision Tree 'Acme' in [Acme Marketing Decisions Finished.xlsx]Model
Analysis: Optimal Path of Entire DecisionTree

Probabilities for Decision Tree 'Acme'

Optimal Path of Entire DecisionTree
70%

60%

Probability

50%

40%

30%

20%

10%

Probability Chart Data

Optimal Path
Value Probability
#1 -5480
1.8000%
#2

-1700

6.3000%

#3

-100

63.1000%

#4

3700

28.8000%

4000

3000

2000

1000

-1000

-2000

-3000

-4000

-5000

-6000

0%

Test market?

Acme

796.76
36.9%

Great

National market?

2330.24
78.05%

Great

$10,800
Yes

TRUE

Natl mkt result

-7000

2330.24
Fair

17.07%

6.3%
-1700

$1,620
Yes

TRUE

Test mkt result

-100

796.76
TRUE

No

0
Fair

41.25%

-100
TRUE

No

0
Awful

-100

National market?

21.85%

41.25%

National market?
-100

21.85%
-100

3700

$5,400
4.88%

Awful

28.8%

1.8%
-5480

PrecisionTree Sensitivity Analysis - Strategy Region

Performed By: Kelley School of Business
Date: Friday, February 08, 2008 3:36:39 PM
Output: Decision Tree 'Acme' (Expected Value of Entire Model)
Input: Unit margin (B8)

Strategy Region of Decision Tree 'Acme'

Expected Value of Node 'Test market?' (B41)
With Variation of Unit margin (B8)
4500
4000
3500

Expected Value

3000
2500
2000

No

1500

Yes

1000
500
0

Unit margin (B8)

Strategy Region Data

Input

No
Value

Yes

#1

Value
$8

Change (%)
-55.56%

Change (%)
0
-100.00%

#2

$10

-43.21%

-100.00%

#3

$12

-30.86%

#4

$15

-18.52%

#5

$17

-6.17%

#6

$19

6.17%

510.6666667

#7

$21

18.52%

#8

$24

#9

$26

#10

$28

Value
-100

Change (%)
-112.55%

-100

-112.55%

-100.00%

-100

-112.55%

-100.00%

152.36

-80.88%

-100.00%

581.96

-26.96%

-35.91%

1011.56

26.96%

1384

73.70%

1512.38

89.82%

30.86%

2257.333333

183.31%

2250.18

182.42%

43.21%

3130.666667

292.92%

3030.666667

280.37%

55.56%

4004

402.54%

3904

389.98%

$30

$25

$20

$15

$5

$10

-500

PrecisionTree Sensitivity Analysis - Strategy Region

Performed By: Kelley School of Business
Date: Friday, February 08, 2008 3:42:04 PM
Output: Decision Tree 'Acme' (Expected Value of Node 'National market?' (C31))
Input: Unit margin (B8)

Strategy Region of Decision Tree 'Acme'

Expected Value of Node 'National market?' (C31)
With Variation of Unit margin (B8)
5000
4000
3000

Expected Value

2000
1000
0

No

-1000

Yes

-2000
-3000
-4000

Unit margin (B8)

Strategy Region Data

Input

No

#1

Value
$8

Change (%) Value Change (%)

-55.56%
0
-100.00%

#2

$10

-43.21%

#3

$12

-30.86%

#4

$15

-18.52%

#5

$17

#6

$19

#7

Yes
Value
-3856

Change (%)
-5310.81%

-100.00%

-2982.666667

-4130.63%

-100.00%

-2109.333333

-2950.45%

-100.00%

-1236

-1770.27%

-6.17%

-100.00%

-362.6666667

-590.09%

6.17%

-100.00%

510.6666667

590.09%

$21

18.52%

-100.00%

1384

1770.27%

#8

$24

30.86%

-100.00%

2257.333333

2950.45%

#9

$26

43.21%

-100.00%

3130.666667

4130.63%

#10

$28

55.56%

-100.00%

4004

5310.81%

$30

$25

$20

$15

$5

$10

-5000

PrecisionTree Sensitivity Analysis - Strategy Region

Performed By: Kelley School of Business
Date: Friday, February 08, 2008 3:44:36 PM
Output: Decision Tree 'Acme' (Expected Value of Node 'National market?' (D71))
Input: Unit margin (B8)

Strategy Region of Decision Tree 'Acme'

Expected Value of Node 'National market?' (D71)
With Variation of Unit margin (B8)
1000

Expected Value

-1000

-2000

No
Yes

-3000

-4000

Unit margin (B8)

Strategy Region Data

Input

No

Yes

#1

Value
$8

Change (%) Value Change (%)

-55.56%
-100
0.00%

Value
Change (%)
-4866.956522 -4766.96%

#2

$10

-43.21%

-100

0.00%

-4246.666667

-4146.67%

#3

$12

-30.86%

-100

0.00%

-3626.376812

-3526.38%

#4

$15

-18.52%

-100

0.00%

-3006.086957

-2906.09%

#5

$17

-6.17%

-100

0.00%

-2385.797101

-2285.80%

#6

$19

6.17%

-100

0.00%

-1765.507246

-1665.51%

#7

$21

18.52%

-100

0.00%

-1145.217391

-1045.22%

#8

$24

30.86%

-100

0.00%

-524.9275362

-424.93%

#9

$26

43.21%

-100

0.00%

95.36231884

195.36%

#10

$28

55.56%

-100

0.00%

715.6521739

815.65%

$30

$25

$20

$15

$5

$10

-5000

PrecisionTree Sensitivity Analysis - Strategy Region

Performed By: Kelley School of Business
Date: Friday, February 08, 2008 3:46:00 PM
Output: Decision Tree 'Acme' (Expected Value of Node 'National market?' (D45))
Input: Unit margin (B8)

Strategy Region of Decision Tree 'Acme'

Expected Value of Node 'National market?' (D45)
With Variation of Unit margin (B8)
8000

6000

Expected Value

4000

2000

No
Yes

-2000

Unit margin (B8)

Strategy Region Data

Input

No

Change (%) Value Change (%)

-55.56%
-100
-104.29%

Yes

#1

Value
$8

Value
Change (%)
-2908.780488
-224.83%

#2

$10

-43.21%

-100

-104.29%

-1744.552846

-174.87%

#3

$12

-30.86%

-100

-104.29%

-580.3252033

-124.90%

#4

$15

-18.52%

-100

-104.29%

583.902439

-74.94%

#5

$17

-6.17%

-100

-104.29%

1748.130081

-24.98%

#6

$19

6.17%

-100

-104.29%

2912.357724

24.98%

#7

$21

18.52%

-100

-104.29%

4076.585366

74.94%

#8

$24

30.86%

-100

-104.29%

5240.813008

124.90%

#9

$26

43.21%

-100

-104.29%

6405.04065

174.87%

#10

$28

55.56%

-100

-104.29%

7569.268293

224.83%

$30

$25

$20

$15

$5

$10

-4000