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Valuing Limited Information in Decision Making Under Uncertainty

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Author Info
Allan W. Gray ()
Joshua D. Detre ()
Brian C. Briggeman () (Department of Agricultural Economics, College of Agriculture, Purdue University)

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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.

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Publisher Info
Paper provided by Purdue University, College of Agriculture, Department of Agricultural Economics in its series Working Papers with number 05-02.

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Length: 16 pages
Date of creation: Apr 2005
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Handle: RePEc:pae:wpaper:05-02

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Related research
Keywords: : simulation uncertainty strategic management flexibility limited information investment analysis

Other versions of this item:

Find related papers by JEL classification:
C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-38, June. [Downloadable!] (restricted)
    Other versions:
  2. McDonald, Robert & Siegel, Daniel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 707-27, November. [Downloadable!] (restricted)
  3. Jayson L. Lusk, 2003. "Effects of Cheap Talk on Consumer Willingness-to-Pay for Golden Rice," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 85(4), pages 840-856, November. [Downloadable!] (restricted)
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