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Freemark Abbey Winery Case Solution

Case ID: 181027
Solution ID: 22845

Words: 1426

Price: $75

Case Solution

Free mark Abbey must pick whether to harvest in context of the probability of storm. The deluge could hurt the yield anyway delaying the collect would be unsafe. On the other hand, downpour could be helpful and fundamentally construct the estimation of the ensuing wine. This decision is additionally jumbled by how that prepared Riesling grapes can be vinified in two courses, achieving two unmistakable styles of wine. Their relative expenses would depend on the questionable tendency of purchasers two years sometime later when the wine is bundled and sold.

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Questions Covered

Draw a decision tree to depict the choices and possible events Jaeger is facing.  What are the decisions to be made?  What are the chance nodes that will occur?  What are the payoffs?  (In drawing your tree, assume that Jaeger is an expected value maximizer, i.e. that he is risk-neutral.)

How would the optimal decision change if the reputation damage from bottling a thin wine were substantial enough that Jaeger would rather sell the grapes in bulk than bottle a thin wine?

How much would Jaeger be willing to pay for a weather forecast that would tell him with near certainty whether or not the storm will hit?

How would risk aversion affect the harvest decision?