6, and the chances of rain is 0.4. Historical data may be used for forecasting, but past patterns will not necessarily be reliable.
To gain a more reliable assessment there are alternatives; the weather service makes advanced forecasts based on a large amount of data. However, to gain this information the business will have to pay a fee. This means that there is a cost associated with gaining the more accurate data. It may also be assumed that if data to be used in the decision is being gained from an external source, there may also be a time delay. If a fast decision is needed, the decision may need to be based only in the information at hand, trading off the potential accuracy to gain the speed. If the decision is not needed quickly, then the extra time may be well spent; accuracy will be gain at the cost of speed. If the forecast from the weather service is that there is only a 30% chance of rain over that weekend, this can be used in the probably calculation, showing a 0.7 probability that it will be fine, and a 0.3 probability it will rain.
Assessing the accurate probability that there will be competition is more difficult. The trader knows that only one competitor has been invited. It may also be known and that in the past some years they have attended the festival, but in other years they have attended an alternate festival; five years at each. As there is no approach that is likely to be accurate, so the most viable approach is to use the historical data, giving 0.5 probability of each potential outcome.
This may then be used to assess the probability of each outcome.
Table 1; Probability table
F/R probability
C/N probability
Overall probability
FN
0.7
0.5
0.35
FC
0.7
0.5
0.35
RN
0.3
0.5
Table 2; Revenues for each outcome
Net revenue
Less fee for stall
Net profit/loss
FN
20,000
5,000
15,000
FC
10,000
5,000
5,000
RN
8,000
5,000
3,000
RC
4,000
5,000
-1,000
From this it is apparent that there is only one outcome where there is a loss; that is where it rains and where the competition is present. This means there is only a 0.15 probability of the firm making a loss and a 0.85 probability that there will be a profit. Therefore, in this case it is recommended that the business takes the stall, as long as there is not a better opportunity available.
References
Ames, D. R; Weber, E. U; Zou, X, (2012), Mind-reading in strategic interaction: The impact of perceived similarity on projection and stereotyping, Organizational Behavior and Human Decision Processes, 117, 96-110
Anderson, David R., Sweeney, Dennis J; Davis, Duane; Utts, Jessica M; Williams, Thomas a; Simon, Marilyn, (2001), Statistics and Research Methods for Managerial Decisions, South-Western College Publishing
Stine, Robert a; Foster, Dean, (2010), Statistics for Business: Decision Making and Analysis, Pearson
Decision Making Decision-making Scenario Anderson Children's Hospital (ACH) is an internationally known and recognized pediatric hospital that provides the full range of services from primary to critical care units, located in San Francisco, CA with affiliated care centers throughout the Bay Area. The board of directors at ACH would like to create a mobile-crisis program to be piloted in the City of San Francisco and eventually grow to service the entire Bay Area.
The two scenarios are likely to sway employees to provide false information if they are encouraged. However, the relationship had much strength in the positive. Therefore, in this study, there were clear choices. The participants were required to either tell the truth or lie. If things were easy for individuals in the world, lines of making moral decisions tend to be much fuzzier, however, the bottom line remains the same
Probability Concepts & Applications (1) Describe the rationale for utilizing probability concepts. Is there more than one type of probability? If so, describe the different types of probability. One uses probability mathematics in order to assess the probability of a particular occurrence or the results of a particular action; For instance, whether or not one should go into a certain market or invest in a certain product -- what are the chances
Demographics of Raleigh, NC Demographic and independent variables relevant to complete a demand analysis include population size and Average income per household. An area with a high population size is most likely to have potential for demand of products, According to the U.S. Census Bureau (2010) the there are 403,892 people in Raleigh, NC. In line with this, the population must be able to have disposable income to buy these products.
Decision Analysis System Computers have brought a great change in our lives. A software program called spreadsheet turns the computer screen into a paper sheet one is working on. This program saves time by reducing the errors and repetitions of calculations. It is commonly used in physics labs in order to save time by getting accurate results and accumulating proper data in labs. Spreadsheets have traditionally been used by accountants
An example of a business situation where the probability distribution may be utilized is a scenario where a manager attempts to predict employee retention. The statistical test would be a binary logistic regression analysis. The probability distribution is paramount to this example because it utilizes the dichotomous dependent variable of Yes/No (employee stays/employee quits). Independent variables that may be used to predict employee retention include education level, length of employment,
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now