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Case Study Issi

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DISC 321 Submitted to: Kamran Ali Chatha Submitted by: Group 6 17110271 17110321 17110129 17110326 This case study sheds light on the value of information as Integrating Siting Systems INC (ISSI) has to make a decision on whether to conduct a test or go with a regular decisionmaking process in deciding whether to produce a standard or robust system. Our aim is to decide whether we should install the standard system, the robust system or to carry out a test that would help us make a better decision. Assumptions: 1. Cost of reputation lost in case of Faulty system is $ 100,000. 2. We have assumed that there are only two possible outcomes if the test is imperfect i.e. whatever the system turns out to be (bad or good) …show more content…

However in this case the assumption that it would cost them $100,000 in monetary terms seems fairly adequate. However from a marketing viewpoint, reputation is worth a lot. If you put it in monetary terms then if I expect that the less of reputation will cost be $1,100,000 or more, then I will change my decision to install a robust system because then the EMV of installing a standard system would be equal to or lower than that of the robust system. What is this test worth to you? What would you pay for a perfect information? The test provides us with expected value of information which helps us to evaluate our decision with cases where the information is not clear. Furthermore, the uncertainty regarding the decision, despite coming at the cost of $50,000, is resolved before a particular choice of selecting the standard or robust choice is made. However, once the decision is made, the market will take its course of action. It is simply the fact that ISSI has a fair idea of the possible outcome. If ISSI does not carry out the test, it will only have the option to either install the standard system or the robust system. The dilemma in this decision is that either ISSI will install the standard system and earn a profit of $300,000 which has a probability of 90% or a loss of $200,000 if the system does not work which has a probability of 10%. On the other hand if the robust system is installed ISSI will

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