Spreadsheet modeling & decision analysis Chapter 12 problem 10 WVTU is a televis
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Spreadsheet modeling & decision analysis Chapter 12 problem 10
WVTU is a television station that has 20 thirty-second advertising slots during their regularly scheduled programming each evening. The station is now selling advertising for the first few days in November. They could sell all the slots immediately for $4,500 each, but because November 7 will be an election day, the station manager knows she may be able to sell slots at the last minute to political candidates in tight races for a price of $8,000 each. The demand for these last-minute slots is estimated as follows:
Slots not sold in advance and not sold to political candidates at the last minute can be sold to local advertisers at a price of $2,000.
a. If the station manager sells all the advertising slots in advance, how much revenue will the station receive?
b. How many advertising slots should be sold in advance if the station manager wants to maximize expected revenue? Manager doesn’t want to sell more than 10 slots in advance.
Run the simulation 5000 time.
Demand 8 9 10 11 12 13 14 15 16 17 18 19 Probability 0.03 0.05 0.10 0.15 0.20 0.15 0.10 0.05 0.05 0.05 0.05 0.02Explanation / Answer
a) Each slot price = 4500
Total number of slots= 20
Total revenue if all slots is sold in advance=4500*20=$90000
b) 8 slots should be sold in advance in order to maximise the revenue. As the left 12 slots have the higher probability to be selling out to the political candidates and the left to local advetisers.
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