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ACP, Inc. (A)
Bodily, Samuel E. Case QA-0430 / Published September 9, 1992
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A division president of a Fortune 50 company must decide whether to initiate an immense capacity expansion. The critical question is whether revenue from the company's major product line will continue to grow rapidly. An opportunity is available to conduct some market research prior to making the decision. This case introduces the steps of decision analysis: decision diagramming, assessing monetary consequences, assigning probabilities, and evaluating expected monetary value to "fold back" the decision tree. The case also develops the ideas of value of information (clairvoyance), control (wizardry), and sensitivity analysis (breakeven probability). (The B case is QA-0431.)


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  • Overview

    A division president of a Fortune 50 company must decide whether to initiate an immense capacity expansion. The critical question is whether revenue from the company's major product line will continue to grow rapidly. An opportunity is available to conduct some market research prior to making the decision. This case introduces the steps of decision analysis: decision diagramming, assessing monetary consequences, assigning probabilities, and evaluating expected monetary value to "fold back" the decision tree. The case also develops the ideas of value of information (clairvoyance), control (wizardry), and sensitivity analysis (breakeven probability). (The B case is QA-0431.)

  • Learning Objectives