A Pacific Northwest Lumber Company Is Considering the Expansion of One

question 30

Essay

A Pacific Northwest lumber company is considering the expansion of one of its mills.The question is whether to do it now or wait one year and reconsider.If it expands now,the major factors are the state of the economy and the level of interest rates.The combination of these two factors results in five possible situations.If it does not expand now,only the state of the economy is important and three conditions characterize the possibilities.The following table summarizes the situation:
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a.Draw the decision tree for this problem.
b.What is the expected value for expanding?
c.What is the expected value for not expanding?
d.Based on expected value,what should the company's decision(s)be?
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Definitions:

Integrative Bargaining

A rephrased definition: A negotiation approach aiming at mutual gain, where the interests of all parties are optimized rather than competed over.

Aggressive Avoidance

A defensive strategy where an individual or group actively avoids certain situations or making decisions, often through confrontational or hostile means.

Passive Aggressive Avoidance

A behavior pattern where individuals express negative feelings, resentment, or aggression in indirect or passive ways, rather than directly addressing conflict.

Promises and Offers

A strategy in negotiations where commitments or benefits are proposed to reach an agreement.