DECISION TREE TUTORIAL QUESTIONS QUESTION 1 An events management company is trying to decide whether or not to advertise an outdoor concert. The sale of tickets is dependent on the weather. If the weather is poor it is expected that 5 000 tickets will be sold without advertising. There is a 70% chance that the weather will be poor. If the weather is good it is expected that 10 000 tickets will be sold without advertising. There is a 30 % chance that the weather will be good. If the concert is advertised and the weather is poor, there is a 60% chance that the advertising will stimulate further demand and ticket sales will increase to 7 000. If the weather is good there is a 25% chance the advertising will stimulate demand and ticket sales will increase to 13 000. The profit expected, before deducting the cost of advertising, at different levels of ticket sales are as follows: The cost of advertising the concert will be N$15 000. Number of tickets sold Profit N$ (20 000) (5 000) 35 000 55 000 70 000 5 000 6 000 7 000 8 000 9 000 10 000 11 000 12 000 13 000 90 000 115 000 130 000 150 000 Required: Demonstrate, using a decision tree, whether the concert should be advertised or not.
DECISION TREE TUTORIAL QUESTIONS QUESTION 1 An events management company is trying to decide whether or not to advertise an outdoor concert. The sale of tickets is dependent on the weather. If the weather is poor it is expected that 5 000 tickets will be sold without advertising. There is a 70% chance that the weather will be poor. If the weather is good it is expected that 10 000 tickets will be sold without advertising. There is a 30 % chance that the weather will be good. If the concert is advertised and the weather is poor, there is a 60% chance that the advertising will stimulate further demand and ticket sales will increase to 7 000. If the weather is good there is a 25% chance the advertising will stimulate demand and ticket sales will increase to 13 000. The profit expected, before deducting the cost of advertising, at different levels of ticket sales are as follows: The cost of advertising the concert will be N$15 000. Number of tickets sold Profit N$ (20 000) (5 000) 35 000 55 000 70 000 5 000 6 000 7 000 8 000 9 000 10 000 11 000 12 000 13 000 90 000 115 000 130 000 150 000 Required: Demonstrate, using a decision tree, whether the concert should be advertised or not.
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter13: Regression And Forecasting Models
Section13.4: Multiple Regression Models
Problem 12P
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