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Valuing Limited Information In Decision Making Under Uncertainty

Author

Listed:
  • Gray, Allan W.
  • Detre, Joshua D.
  • Briggeman, Brian C.

Abstract

Fresh Juice Inc. (FJI) is in the process of determining whether they should launch a new fruit juice in a market that has been relatively stagnant for the last 15 years. Management of FJI is faced with uncertainty surrounding market share, market size, price, and competitor entry. In addition, FJI has the ability to chose between alternative production processes; this choice directly affects the likelihood the investment will return a positive Net Present Value. This case teaches students how to develop a stochastic simulation models given limited information to analyze risk investment decisions

Suggested Citation

  • Gray, Allan W. & Detre, Joshua D. & Briggeman, Brian C., 2005. "Valuing Limited Information In Decision Making Under Uncertainty," Staff Papers 28676, Purdue University, Department of Agricultural Economics.
    • Handle: RePEc:ags:puaesp:28676
    DOI: 10.22004/ag.econ.28676
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    References listed on IDEAS

    as
    1. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    2. Jayson L. Lusk, 2003. "Effects of Cheap Talk on Consumer Willingness-to-Pay for Golden Rice," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(4), pages 840-856.
    3. Robert McDonald & Daniel Siegel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(4), pages 707-727.
    4. Stephen G. Powell, 1997. "The Teachers' Forum: From Intelligent Consumer to Active Modeler, Two MBA Success Stories," Interfaces, INFORMS, vol. 27(3), pages 88-98, June.
    5. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-638, June.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Briggeman, Brian C. & Gunderson, Michael A. & Detre, Joshua D., 2006. "Protecting Your Turf: First-mover Advantages as a Barrier to Competitor Innovation," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 9(1), pages 1-18.

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    More about this item

    Keywords

    Risk and Uncertainty;

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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