This decision analysis project was conducted to assist Real Madrid CF in making two separate decisions. With the first decision, the club is evaluating season ticket offerings for the 2022-2023 season in light of the ongoing renovations at the Santiago Bernabeu stadium and the uncertainty regarding demand for season tickets. With the second decision, the club is releasing a limited edition Valentine's Day kit produced by its German supplier. The club is assessing optimal order quantity in light of the ongoing snowstorm in Germany, the uncertainty around demand for the kit, and the availability of a local supplier.
The analyses were carried out using Palisade's DecisionTools Suite, specifically PrecisionTree and @RISK. The software provided a comprehensive approach for modeling uncertainties and risks inherent in the two decisions.
For the first decision, offering 60,000 season tickets was identified as the optimal alternative, with an expected revenue of €13,609,230.42. Sensitivity analysis was then applied to examine the influence of two variables on the decision: the probability of completing construction before the start of next season and the bonus refund extended by the club for owners of unfulfilled tickets. The results showed that an increase in the probability of completing construction before the start of next season leads to a higher expected value for the decision to offer 60,000 tickets, while an increase in the bonus refund supports offering 40,000 tickets. Finally, value of information analysis was used to evaluate the expected benefit of hiring a consultant for assessing construction progress, which amounted to €497,536.08. The analysis showed that the value of perfect information was €756,298.06.
For the second decision, simulation was used to identify 32,000 as the optimal shirt order quantity for the German supplier, which would entail an expected revenue of €639,466.01 with standard deviation €316,330.77. Switching to the local supplier resulted in an expected profit of €638,814.87 with standard deviation $343,637.27. With higher expected profit and less risk, sourcing the shirts from the German supplier was identified as the better alternative.
In conclusion, this decision analysis project has provided Real Madrid CF with valuable insights into two important decisions. By using Palisade's DecisionTools Suite, the project team was able to model and analyze uncertainties and risks inherent in the decisions, providing a comprehensive approach for decision-making. The analysis for the first decision showed that offering 60,000 season tickets was the optimal alternative, but that the probability of completing construction before the start of next season and the bonus refund extended by the club for owners of unfulfilled tickets were critical factors to consider. For the second decision, simulation was used to identify the optimal shirt order quantity. Based on the results, the club should order 32,000 shirts to maximize expected revenue. Overall, the project demonstrated the value of decision analysis in supporting complex decision-making processes, and its results will help Real Madrid CF make informed decisions to achieve its goals.