Payoff Table for Bidding and Hosting Sporting Events
Event A Event B
Cost of Bidding. $200,000. $10,000
Probability Being Awarded 0.1. 0.9
Cost of Hosting $1,000,000. $60,000
Probability of Hosting
Successfully 0.7 0 .9
Financial Benefit Expected by an Excellent Event
(including revenue for the convention center and
economic impact for the city)
For event A $50,000,000 and for event B $3,750,000
Financial Benefit Expected by a Mediocre Event
(including revenue for the convention center and
economic impact for the city)
For Event A $38,000,000 for event B$1,600,000
Construct a decision tree as the sport marketing manager of the local sports commission
and convention and visitors bureau (CVB) for Jeffersonville.
Compare the three alternatives (Event A, Event B, or not bidding for any event) for their
expected values and net gains.
Prepare your recommendation to the executives from the sports commission and
convention center and be prepared to explain your decision tree model and the preferred
choice.
Calculate the expected value and the net gain for Event A with the new probability of .3
for being awarded the event, and compare the new outcome for Event A with the
outcome of Event B from previous assignment.
2. What would your recommendation to the executives be now?
3. What are three main take-aways from this exercise?