Posted: May 3rd, 2021

Perform an analysis of the problem facing Allied Insurance and prepare a report that summarizes your findings and recommendations. Be sure to address the following issues:

- The payoff table of Russo Manufacturing, ignoring all the probabilities.

(5 marks) - Recommendations regarding which decision the management should take if they ignore

the probabilities and decide to apply the following decision criteria:

- Optimistic Approach
- Conservative Approach
- Minimax Regret Approach

(5 marks)

(5 marks)

(5 marks)

- Computation of the posterior probabilities of weak demand, medium demand and strong demand given the market research is conducted. Briefly explain the meaning of

these probabilities.

(5 marks) - A decision tree illustrating the decisions and events that Russo is facing. All the payoffs,

probabilities and decision at each step need to be labelled carefully on the tree.

(25 marks) - A recommendation whether the market research should be undertaken. Explain clearly the reasons for your recommendation.

(10 marks) - A decision strategy that Russo should follow if they take the recommended action in 5. (10 marks)
- A sensitivity analysis to illustrate how different decisions change if the prior probability

of [xiii.] change by 0.1 at a time.

(20 marks)

Presentation (10 marks)

The report must be written in a clear manner and including the required items. There is no need to restate the questions in your report. Your report must have the following structure:

- Executive summary

Give an overview of the problem, the solutions and the recommendation - Introduction

Introduce the case study and the objectives of the report - Main body

This section addresses all the questions associated with the case study. - Conclusion

Conclude the case study and present your recommendations to the board of directors based on the analysis.

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