The course is called managerial decision making.

Take-home Assignment (Maximum Points: 30)

Name _________________________________

INSTRUCTIONS: Complete this assignment and upload it to Canvas. Please work on this assignment ON YOUR OWN. Don't check answers with other class members. You can use class readings, lecture notes, and slides to help you complete the assignment. Do not use any other sources. Your work here is bound by the honor code.

1. Imagine that it is the not-too-distant future. There are a few communities of people who are taking personal computing to a whole new level by implanting computer chips directly into their bodies, even into their brains! Also imagine that when executives at Intel are told about this, they scoff and insist it will only ever be a small niche. What could Intel execs do to make sure they aren’t caught by surprise if implantable technology becomes wildly popular? Be specific/give a concrete example. (2 points)

1. Suppose that Person A and Person B (who do not know each other) are each looking for a book on foraging so they can figure out what plants (and fungi and bugs) are safe to eat on their daily walks in the woods. Neither person has foraged before, so they are complete novices.

Person A wanders into a bookstore and finds a book that has 125 descriptions of things that can be eaten, but the book is used and in so-so condition.

Person B wanders into a bookstore and finds a brand new book in perfect condition that only has 25 descriptions of things that can be eaten.

Part 1: Each person only knows about the book in front of them (Person A does not know about the book Person B is thinking about and vice versa). In that moment, who do you think would be willing to pay more for the book that they are considering? And why? (2 points)

Part 2: Suppose that someone, Person C, knew about both books. Which one would they be willing to pay more for? (1 point)

1. Imagine that you work at a mid-size consulting firm. Your company is trying to refine the criteria it looks for when hiring new employees. Your colleague suggests reviewing the characteristics of the people who have been promoted most quickly in recent years, presumably because those are the people who have been most successful at the organization. Your colleague says that after reviewing all of the people who were quickly promoted, it appears that they all have something in common: They are exceptional writers. Your colleague proposes asking for writing samples from new candidates.

What’s the problem with this person’s analysis? (2 points)

What could you do instead to have a better sense of whether writing ability matters for success at the organization? (1 point)

1. Suppose the pandemic is over and life has returned to whatever normal was (say, 2018 levels of “normal”). A new student walks into their first class ever. The professor has written a message on the whiteboard. It says, “I am somewhere on campus. Whoever finds me first gets an automatic A.” This student knows nothing about this professor other than what is written in the syllabus. In the absence of any other information, where is the first place the student should look? And what does this have to do with our class (i.e., connect your answer to a class concept)? (2 points)

1. Imagine you are standing in line at the grocery store. The store has been closed to customers for a while, so there aren’t any new people joining the lines. You’re really eager to get out of the grocery store. So you keep an eye on which lines seem to be moving faster. Every time you see a line that seems to be moving faster, you switch into it. Then, all of a sudden, it seems to slow down a lot. And another line seems to be moving faster—sometimes, even the line that you just switched out of seems to have gotten faster after you left it. No one else is switching lines. It’s just you. You’re that person. So why does it seem like the lines you choose get slow just after you join them? And what does this have to do with our class (i.e., connect your answer to a class concept)? (2 points)

1. Imagine that two people are playing Rock, Paper, Scissors (RPS). Person A has just defeated Person B seven rounds in a row. Lots of people are betting on each round of this competition.

Suppose Person C has been watching this happen. They have declined to bet on any round between Persons A and B so far. But now they feel like they have all of the information they need. They are getting ready to place a big bet on the next round between Persons A and B. Do you think they will bet on Person A or Person B to win? Why? And what does this have to do with our class (i.e., connect your answer to a class concept)? (2 points)

1. ABC company is under contract to make 10,000 blenders. It must decide whether to make or buy the blender motor. Unfortunately, ABC does not presently have motor technology. Motor development is a two-stage process. The first stage has an 80% chance of success and will cost $30,000. The second stage has a 60% chance of success and will cost $20,000. If development is successful, then the variable cost of producing a motor will be $2.50/motor. If either development stage is unsuccessful, ABC must purchase motors outside at a cost of $10/motor.

Part 1: Draw a decision tree and use it to answer this question: Should ABC purchase the motor outside or begin development? (4 points)

Part 2: What is the most ABC would pay to know, before making the first decision, whether the second stage would succeed (assume that you can resolve the uncertainty about the second stage without resolving the uncertainty about the first stage)? (3 points)

1. Suppose you are making a bunch of standard predictions—using the same input variables to predict the outcomes (e.g., using some variables to predict how well applicants will do in an MBA program each year). You do this again. And again. And again. This is your job. Forever. You do it mostly based on an intuitive sense of how the variables are connected to the outcome. Now suppose someone (Anuj) builds a regression model of your past predictions (i.e., I use those input variables to model your past predictions). I then use this regression model of how your mind works to predict future outcomes. Why is it very likely that this regression model will outperform your future predictions? (1 point)

Under what circumstances might the regression model perform worse than you? (1 point)

1. Imagine that you want to watch a movie that you have not yet seen from a list of “100 Movies You Must See.”

Part 1: Describe a scoring system that you might build to help you rank all 100 movies in terms of which ones you are most likely to enjoy. Note: I’m not expecting a super elaborate or intricate answer here. Just something that shows you know what a scoring system is and how to use it. (1.5 points)

Part 2: What’s a shortcut you could use to approximate Franklin’s rule here? In describing the shortcut, note which step of Franklin’s rule it would save effort on. (1.5 points)

1. Use Fermi-izing to guide how you would answer the following question: How many tons of food will the United States waste in 2021? Suppose you have no data on how much food has been wasted in the past. That is, suppose that no one has ever in the history of the human kind calculated how much food has been wasted at any level (household, region, etc.). But you could look up anything else, after you have written your Fermi-ized questions.

You don’t need to produce an estimate, or even a partial estimate. List at least 3 sub-questions that you could ask that might be easier to estimate/guess. Explain how they would help. Your questions should help inform and constrain your estimate. (4 points)

BONUS QUESTION: Points here can offset lost points on other questions. But you cannot earn more than 30 points total (i.e., if you get everything correct, including this bonus question, you will get a 30/30, not a 32/30).

1. Suppose that the U.S. government wants to put money in people’s pockets to stimulate consumer spending. Every household will get a check of some amount of money. The government is debating whether to call the check an “income rebate” or an “income bonus.” Which would Prospect Theory say that the government should choose and why? (2 points)