Case: Freemark Abbey Winery

DISC321-Decision Analysis Section 2

Case: Freemark Abbey Winery

Submitted to: Sir Kamran Ali Chatha

Group#7- Section 2

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FREEMARK ABBEY WINERY

The case presented to us is the Freemark Abbey Winery Case. The learning objective for this case is to learn the making and Analyzing of the Decision Trees.

Mr. William Jaenger, is one of the owners of the Freemark Abbey Winery. He is in the dilemma that whether he should harvest the grapes immediately or leave them on the vines and wait for the storm.

No matter what decision Mr. Jaenger takes, he will be faced to choose between many decisions outcomes and try his luck with many chance events.

Below is the decision tree for the situation:

[pic 1]

As we see in the decision tree the initial decision Mr. Jaenger has to make is to whether Harvest the grapes, or not harvest the grapes and wait for the storm.

If he chooses not to harvest the grapes, Mr. Jaenger will take a not risky decision with the outcome that he will sell the wine for $2.85/bottle.

However, on the other hand, if Mr. Jaenger chooses not to harvest, there are two possible outcomes i.e  either the storm will hit or it will miss, each outcome with a 50% probability.

In case of no storm, Mr. William will have to leave grapes to ripe and will have to monitor their acid level. If the acid level drops below .7% he will have to sell it at $2.5/bottle. The probability of this event is only .20. In the other scenario, in which the acid level is above 7% he will either have a wine with high sugar which can be sold for $3.5\bottle or he will have wine with low sugar levels which he can sell for $3. Both these outcomes have equal probability of occurrence. The probability that the acid level will be above 0.7% is .80.

In the case there is a storm, there is a probability of 0.4 that there will be an attack of botrytised mold and high quality wine will be produced which would sell for $8/bottle. He will be able to sell this fine wine for $8 per bottle.

In the other case if Mr. Jeanger is not able to develop a fine quality wine, which has a probability of 0.6, he has to decide among the three alternative decisions.

1. Sell the wine for $2\bottle.
2. Sell the wine in bulk
3. Sell the grapes directly.

To select the best decision/EMV for MR. Jaenger we will have to first find the payoff against each node. According to the data given in the case the about 1000 cases of Riesling wines are produces. Since each case contain 12 bottles so a total of 12,000 bottles are produces. Another important point to be kept in mind is that the production of Botrytised Riesling decreases by 30% so in that case the production will fall to 8,400 bottles. EMV for all the nodes are calculated and are shown in the diagram below.